By Kayode Tokede, Lagos and Funmilayo Odunola, Abuja
The Central Bank of Nigeria (CBN) has disclosed that banking industry loans hit N16.23 trillion in September, 5.4 per cent from N15.4 trillion reported in June 2019.
The CBN governor, Mr. Godwin Emefiele in his communiqué at the end of the Monetary Policy Meeting (MPC) noted that members noted the improvements in the financial soundness indicators and urged the Management of the Bank to sustain its regulatory surveillance to ensure continued financial system stability.
He noted that the committee urged the management of the Bank to explore new initiatives to further improve lending to the private sector, while calling on government to adopt other ways of funding its operations outside the banking sector.
Speaking on the recent directive to Deposit Money Banks (DMBs) to increase their Loan-to-Deposit Ratio (LDR) to 60 per cent, he said the MPC members underscored the need to grow consumer, mortgage and corporate credit to drive aggregate demand and ensure a reduction in unemployment and increase in output growth.
According to him, the committee urged the management of the Bank to fast-track the development of the credit scoring system, to promote increased.
“In addition, the committee commended the introduction of the Global Standing Instruction (GSI) initiative aimed at de-risking credit in the industry by committing bank customers to repay their loans to banks.
“The MPC further noted the increased supply of micro credit to key Micro Small and Medium Enterprises (MSMEs) and efforts through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank to extend the reach of its credit facilities across the country.
“The MPC however, observed that the growth in credit to the private sector remained significantly low, relative to the absorptive capacity of the economy.”
According to the CBN governor, the MPC further underscored the linkage between high unemployment and heightened insecurity, emphasizing the critical need for urgent steps towards more jobs and wealth creation in the country.
Stating immediate solution, he noted that the committee called on government at all levels to ratchet up public works programmes aimed at easing the threat of rising unemployment in the country.
He explained that, “This, the committee argued, would be achieved through efficiency in public spending.”
On federal government proposed 7.5 per cent increase on Value Added tax (VAT) he noted that the implication would improve fiscal revenue to support expenditure and reduce the budget deficit as well as government borrowing when implemented.
He explained further that, “the committee, however, noted that this was too little to close the gap in Government finances.
“Consequently, the MPC called on the Government to, as a matter of urgency, adopt what it termed a BIG BANG approach towards building fiscal buffers by purposefully freeing-up redundant public assets through an efficient, effective and transparent privatization process.
“This would raise significant revenue for the Government and resuscitate the redundant assets to generate employment and contribute effectively to national economic growth.
“The MPC noted the unstable oil prices, its implications on accretion to external reserves and its persistent call on the Government to build fiscal buffers.
“Consequently, the Committee called on the National Assembly to exercise restraint from increasing the oil price budget benchmark to avoid budgetary overruns at the implementation stage of the budget. Projections from the oil futures market, indicate that oil prices will remain tight around the budget oil price benchmark in the medium term.”