CBN sees banks moving in right direction on new lending measures

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The Central Bank of Nigeria (CBN) is seeing signs that its order to commercial banks to turn on the tap on lending to small businesses is yielding fruit, according to a source at the apex bank. “Lending rates are trending downward and that’s a big sign that banks are already looking for means to create…

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Banking on Circulars

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The Central Bank of Nigeria (CBN), released 2 circulars in the past week and a half that have the potential to alter the current landscape of the domestic banking sector.

On Wednesday July 3, the CBN issued a notice to all banks in a circular with reference number BSD/DIR/GEN/MDD/01/045, signed by Ahmad Abdullahi, director, banking operations, directing them to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent by September 30, 2019.

It said the ratio “shall be subject to quarterly review.”

The apex bank warned that failure to meet the stipulated minimum LDR by the specified date “shall result in a levy of additional Cash Reserve Requirement (CRR) equal to 50 percent of the lending shortfall of the target LDR.”

The LDR is ratio that is used in determining the amount of loans that a bank has out versus the amount of current deposits on hand.

A high loans to deposits ratio means that the bank is issuing out more of its deposits in the form of loans, while a very low ratio means that the bank is risk averse, and not issuing as much loans as it could compared to its level of deposits.

Our calculations show that as at the end of the First Quarter of 2019, a number of the big banks were below the 60 percent threshold for LDR, meaning they would need to boost loans to comply with the guidelines.

The CRR refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the central bank.

Another Circular was released barely a week later on July 10th by the CBN, limiting the amount of excess cash Banks can park with it and earn interest on.

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CBN has changed Nigerians’ preference of foreign goods to local ones – Okorafor

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The Central Bank of Nigeria (CBN) has said that one of its greatest achievements is the cultural change of Nigerians who no longer ask for foreign rice.

Isaac Okorafor, director of Public Communication (CBN), who stated this in Umuahia during the apex Bank’s Fair with the theme ‘Promoting Financial Stability and Economic Development’, noted that the bank has been able to achieve this feat through the Anchor Borrowers Programme.

He disclosed that Kebbi and Ebonyi states through the ABP now produce rice in large quantity, thereby saving the country its foreign reserves from importation of rice.

Okorafor, who was represented by Sam Okogbuo, assistant director, Public Communication, also said the CBN has equally given boost to small and medium scale enterprises which now are flourishing in all parts of the country, particularly the garment industries.

Michael Ogbu, branch controller of CBN, Umuahia earlier in his speech said the aim of the Fair was to enlighten the public on some of the activities of the apex bank that were hitherto not known to them which included customer rights and responsibilities, BVN, financial inclusiveness and agricultural financing to micro, small and medium enterprise, among others.

He noted that the bank has done much on the above and would continue to do more to ensure the economic development of Nigeria.

 

UDOKA AGWU, UMUAHIA.

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The 10 commodities CBN is focusing in next five years, are you positioned?

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The Central Bank of Nigeria (CBN) has made agriculture a focus area in recent years, and in the apex bank’s plan for the next five years (2019 to 2024), ten commodities have been identified for special intervention.

Rice, Maize, Cassava, Cocoa, Tomato, Cotton, Oil-palm, Poultry, Fish, and Livestock/Dairy, according to Godwin Emefiele, the CBN governor, are to record a boost in agricultural productivity through the provision of improved seedlings, as well as access to finance for rural farmers.

The ten focus commodities are highlighted below, with some prospects.

Rice

“Before the Anchor Borrowers’ Programme, we would cultivate rice, but will not have buyers,” said Mohammed Suleiman Ambursa, a judge of the Kebbi State High Court, who was on his farm during a visit to Birnin Kebbi.  “The price was so low before,” he said.

Now that there more rice mills springing up, there is an increase in demand for paddy. This presents an opportunity for those who want to take advantage of producing rice, which is perhaps Nigeria’s most consumed staple food.

For the price of local rice to come down significantly, Rotimi Fashola, general manager, Elephant Group Plc, told BusinessDay the cost of paddy (which is the raw material) will have to sell well below N100,000 per metric tonne. Currently, it sells for N115,000 on the average, before other logistics costs are factored in, which could then take it to about N130,000.

According to the Food and Agriculture Organisation (FAO), Nigeria’s rice production reached 7 million tonnes (4.2 million tonnes, milled basis) in 2017, up 12 per cent from 6.3 million tonnes (3.8 million tonnes, milled basis) in 2015. Official, accurate data to ascertain consumption and the gap with production is not readily available. However, when the smuggling market is considered, the opportunities become … Read More...

Bank stocks sell-off on CBN’s lending order may be overdone

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Bank stocks have been selling off since the Central Bank of Nigeria (CBN) announced plans to force commercial banks to maintain a loan to deposit ratio (LDR) of 60 percent, or effectively lend at least 60 percent of their deposits to customers. Investors, spooked by the potential downside of the July 3 order by the…

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