CBN: our banks not affected by US banks’ failure

The Central Bank of Nigeria (CBN) has dispelled fears of a possible backlash, or linkage of the banking sector failure, or instability arising from the collapse of some big banks in the United States.

The CBN Governor, Godwin Emefiele said this yesterday at the end of the Monetary Policy Committee (MPC) Meeting in Abuja.

Emefiele gave the nation’s banks a clean bill of health when asked yesterday to comment on the health of Nigerian banks and their level of exposure to failed American banks.Information Guide Nigeria

According to THE NATION, he said “the reports that came back to us were that there is no direct investment by Nigerian banks in SVB that could result in a loss of investment”.

Emefiele added, “Nigeria is one of the few countries in the world where we have cash reserves deposit requirements which means that a certain percentage of deposit is held, or serialised at the CBN to ensure that when there are liquidity crisis, that money is available for that bank to use and solve that liquidity problem so that people who deposit don’t lose their money.”NYSC Portal

THE NATION reports that another safeguard, he pointed, out is the liquidity ratio “which is an indices of specified liquid assets against total deposits of a bank, either held in cash in bank vault or bank balances, or money. And in Nigeria our ratio is a minimum of 30 per cent. Banks keep above that today, liquidity ratio is almost about 43 per cent’’.

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According to him, to a large extent, the CBN “has put in place prudential guidelines, rules and regulations that have isolated the Nigerian banking industry from this kind of risk that we saw last week in the United States.”

Emefiele added, “We will continue to repeat that a banking licence is a privilege; it is not a right, the banking licence is the property of the CBN that can be withdrawn at any time once we find that the shareholders are misbehaving. This is a policy that the CBN has held on to even before I became the governor of CBN”.

Speaking on the fight to bring down inflation by tightening interest rate, Emefiele said members of the MPC were “confronted at this meeting that the fact that the tightening measures had started to reduce the rate of inflation, we believe that as we continue this process that inflation will eventually begin to trend downwards”.

“Between now and May or end of this administration, we expect that subsidy will disappear. Subsidy removal has its own implication on inflation. We, at the Monetary Policy Committee, are not optimistic that prices are going to come down because of these measures so we feel that we will continue to tighten and thats what we did at this meeting”.JAMB Portal

The members of the MPC raised the Monetary Policy Rate (MPR) by 50 basis points to 18 percent; retained the asymmetric corridor of +100/-700 basis points around the MPR; retained the Cash Reserve Ratio (CRR) at 32.5 per cent; and retained the Liquidity Ratio at 30 percent.

The Chief Executive Officer of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf In his reaction warned that the increase in the monetary policy rate (MPR) to 18 percent poses an additional burden on businesses in the country.

In a statement made available to The Nation, he said, “the Increase of the MPR to 18 percent means an additional burden on business as it will result in a spike in cost of credit. Production costs would increase, sales will drop, profit margins will shrink and investors confidence will be negatively impacted.”

According to THE NATION, Yusuf revealed, its concerned about the stifling effect of the high CRR of 32.5 percent on the banking system stability and financial intermediation role of the banking system.

Yusuf submitted, “It is regrettable that the CBN governor did not acknowledge the pains and sufferings that ordinary citizens have been going through on account of the cash crisis. The CBN Governor should have shown some empathy and apologise to Nigerians for the trauma inflicted by the cash crisis.”JAMB Result