CBN to lessen banks’ cravings for government bonds

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Governor of the Central Bank of Nigeria, Godwin Emefiele

The central bank of Nigeria (CBN), has said that it would soon announce its means to limit the excess cravings of banks for government security.

Speaking at a press briefing yesterday, 21 May 2019, CBN Governor Godwin Emefiele said that the increased focus of banks on investing in government debt instrument while leaving aside the important role of lending to the private sector in order to develop the needed growth in the economy made it necessary to curtail the banks.

Emefiele stated; “According to our regulation, there is a particular minimum percentage of a treasury bill or government securities that the banks must invest in in order to remain liquid. But unfortunately and increasingly so, that the banks, rather than focusing credit to the private sector, they tend to direct their focus mainly on buying government securities.”

“The MPC has frowned at that and has directed the management of CBN to put in place policies or regulations that will restrict the banks from unlimited access to government securities”.

Godwin Emefiele also added that his team would develop strategies to help mitigate the credit risks of lending to the private sector.

He said that even when the NPLs had improved in the past, it remained higher than the minimum regulatory 5 percent threshold.

The governor also announced that the consumer and mortgage credit markets would be brought into focus in the industry. stating;

“The MPC also felt that the consumer and mortgage credit market must be catalyzed in Nigeria. That one of the inhibiting factors to growth is the fact that we have not been able to jump-start consumer credit and mortgage credit and business in Nigeria and the management of the bank will think of how to put in place regulations that will assist banks to ensure that consumer credit is improved again in Nigeria.”