N499 Billion Debit: CBN Speaks On When Banks Will Get Refund

By Emmanuel Aziken, Editor

The Central Bank of Nigeria (CBN) has opened up on when it will return the N499.1 billion it debited some banks for failing to meet its 60 percent minimum Loan to Deposit Ratio (LDR).

Twelve banks including four Tier 1 banks were debited with N499.1 billion being 50% of the amount the twelve banks collectively failed to lend to meet the LDR.

CBN director of banking supervision, Ahmad Abdullahi, at a press briefing following Thursday meeting of the Bankers Committee also dispelled some insinuations in the press (not GWG) that the debited amount was a fine or levy.

He said:

“If, for instance, your LDR is 57 percent, 50 percent of the 3 percent will be taken from your bank and kept until when you improve on your lending,” Abdullahi explained.

The reassurance nonetheless, the fact that the banks would have to pay interest to the customers for the deposit constrained by the CBN and that the limitation of their activities in other market operations is bound to be a punishment to them, one industry expert said on Friday.

Emphasizing the bank’s determination to push through its reforms to grow the real sector, the CBN chief said:

“We are going to diversify the economy, we are going to provide credit to the real sectors to ensure sustainable growth and development of the economy.”

“The real sector of agriculture, manufacturing and so on for some time has suffered from stunted growth and there is this realisation among the banks that this is the way to go, hence the endorsement of the CBN policy regarding the real sector.”

He was also emphatic that the new policy would not negatively impact the level of risk in the system saying:

“There is a mechanism in place that as part of the documentation by banks, there will be a clause that an obligor will sign that if for any reason the loan that is taken goes bad, then the bank has the right to set off against any amount that the obligor will have in the system.”

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