Business

CBN to deploy N2tr CRR refunds to banks

Published

8 years ago

April 11, 2016

Ripples Nigeria

The Central Bank of Nigeria, CBN, is working out modalities that

would enable it disburse estimated N2 trillion refunds expected from the

five per cent cut in Cash Reserve Ratio (CRR), Ripples learnt at the

weekend.

Speaking at the 326th Bankers’ Committee meeting held in Lagos

at the weekend, CBN Director, Banking Supervision, Mrs. Tokunbo

Martins, said the cut in CRR from 25 per cent to 20 per cent during the November 2015 Monetary Policy Committee (MPC) meeting was meant to channel funds realized from the exercise to lending more to manufacturers and other real sector operators.

The committee said the fund will be released to banks as soon the

CBN concludes the modalities.

“Talking about how soon the funds will be ready, we want to assure you that we know the importance and how urgent it is to lend to the real sector,” it said.

The CRR is a portion of banks’ deposits kept with the CBN as reserves, at

zero interest rate. The MPC’s decision to harmonize the CRR on public and

private sector deposits at 20 per cent would boost ready-cash for

lending.

The CRR was first harmonised by the MPC in May last year, as it

considered that the discriminatory CRR on public and private sector deposits has not only constrained the policy space but could inspire moral hazard by private market participants.

The CBN said commercial banks have not played an active role to

support the Small and Medium Enterprises (SMEs) and stressed that

even if the lenders choose not to co-operate with the CBN, it will forge

ahead with plans to increase finance to the sector in a bid to diversify the

economy from oil.

The CBN lamented that less than 50 per cent of N220 billion Micro, Small and Medium Enterprises (MSMEs’) loan has been assessed since its

creation in 2012, adding there is a need for commercial banks to

think about how to come together to protect the economy from

what is happening not just in Nigeria but in the world in general.

Part of the CBN policy guideline on the MSMEs loan requires 80:20 ratio for

on-lending to micro enterprises and Small and Medium

Enterprises (SMEs) and request that 60 per cent of the fund, representing N132 billion, be earmarked for providing financial services to women-owned

businesses.

There is also a clause that participating financial institutions can only finance agricultural value chain activities; trade and general

commerce; cottage Industries; artisans among others.

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