CBN, CIBN seek economic restructuring

Central Bank Of Nigeria building

Central Bank Of Nigeria building

Worried by the sustained decline in the economy as reflected in the latest report by the National Bureau of Statistics, the Central Bank of Nigeria (CBN) and the Chartered Institute of Bankers of Nigeria (CIBN), have advocated a change in the structure of the Nigerian economy.

According to the financial bodies, there is need for a deliberate and genuine agenda of development financing to fund critical infrastructural projects, education, SMEs, agriculture and manufacturing sector by properly stimulating the financial services sector.

Besides, the CIBN urged the CBN to reconsider the 31 percent Cash Reserve Ratio (CRR) imposed on deposits in the financial sector, adding that the apex bank should look at creative ways through which the ongoing implementation of the Treasury Single Account (TSA) and the CRR would be managed to create development, especially in the critical sectors of the economy.

Speaking at the yearly banking and finance conference of the CIBN, recently, CBN Governor, Godwin Emefiele, explained that the recent oil price crash and its effects on the ability of oil sector borrowers have brought to the fore the need to not concentrate lending in one sector, but to spread risks across all sectors.

According to him, the crisis also highlights the need to promote growth generating productive sectors as against focusing on those knotted to the vagaries of an exogenous market.

Justifying some of the bank’s recent actions, he said: “The current development financing initiatives of the CBN are not misplaced and are neither at variance with history nor with experiences in other jurisdiction. Yet, the decision to elevate our development function is supported by, but not based on, the experiences of these other countries. It is based on a genuine appraisal and understanding of what we need to do in order to get Nigeria on a sustained path of economic growth and development”.

The CIBN President/Chairman of Council, Otunba (Mrs) Debola Osibogun urged efforts to address factors militating against growth and development such as corruption, infrastructural decay; insecurity to lives and properties; dearth of professionalism; and other economic vices, adding that they are of greater concern to the banking sector.

The banking industry has pursued financial inclusion meticulously with the development and introduction of various products and services under the retail banking space. There is no doubt that credits from banks and other financial institutions play an important role in generating growth and reducing poverty. This is because, availability of credit facilities enhances the purchasing power of individuals and households, and this has a multiplier effect on the economy of any nation.

The ongoing implementation of the Treasury Single Account (TSA) is a welcomed initiative. We also believe that the Treasury Single Account will help to cut down the several inconsistencies that have marred public sector fund management in the recent past. Under this initiative, banks would have to leave their comfort zone caused by dependence on government funds to now source for long term and sustainable deposits at cheaper costs, as it is the practice in modern economies around the world”, she added.

She then urged the apex bank to address rising concerns over the current global economic decline as reflected in the happening in Asia economies, fall in the prices of European shares to a seven-month low and the mounting concerns about China’s economy.

Global markets are in panic mode as the full scale of China’s slowdown is becoming clearer. African economies are not insulated from these events.
The Nigeria Gross Domestic Product (GDP) growth rate as released by National Bureau of Statistics showed that the economy had a sustained decline of 2.35 percent in the second quarter of 2015, down from a 3.96 percent expansion reported in the previous quarter. This is the lowest GDP growth rate since the quarterly data is being released due to decline in oil production and prices. We will expect a swift response from government that will help protect the economy under this economic threat”, she stressed.

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1 Comment
  • emmanuel kalu

    maybe now the banks would have to work a bit harder to source for fund. they would have to compete for deposit and compete to lend to the real sector. with MDA deposit, loans to states and marketers, banks have failed to lend money to the real economy or compete to lend to them. hence the starvation of credit and the high cost of credit. two things that need to improved for the economy to grow.