Access Bank’s Chief supports CBN’s new policy to encourage lending

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Access Bank Plc’s Chief Executive Officer (CEO), Herbert Wigwe, has thrown his weight behind the new policy the Central Bank of Nigeria (CBN) put in place for banks, in order to boost lending into the country’s economy.

In an interview with Bloomberg TV on Friday, Wigwe gave a warm welcome to CBN’s directive for banks’ daily deposits placement through the CBN’s Standing Deposit Facility not to exceed N2 billion.

He also supported CBN’s decision to introduce penalties for banks that fail to comply with the new policy in a bid to stimulate lending, particularly to the country’s small and medium-sized businesses.

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Wigwe’s assertion: The Access Bank Chief said, “If we don’t have that kind of thing as sanction coming from the Central Bank, what you will find is that most banks will not do it. The initiative from the Central Bank can only help stimulate growth.” 

The new CBN’s policy: The Central Bank had directed that banks’ daily deposits placement through the CBN’s Standing Deposit Facility, shall no longer exceed N2 billion. 

This new policy was made known in a circular titled, “Guidelines on accessing the CBN Standing Deposit Facility.”

Penalty: According to the circular signed by the Director of Financial Markets Department of the apex bank, Angela Sere-Ejembi, daily deposits by any bank in excess of N2 billion shall not attract interest payments.

Below are some of the key highlights from the circular.

• The remunerable daily placements by banks at the SDF shall not exceed N2 billion.
• The SDF deposit of N2 billion shall be remunerated at the interest rate prescribed by the Monetary Policy Committee (MPC) from time to time.
• Any deposit by a bank in excess of N2 billion shall not be remunerated.

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Easy pie? It should be noted that the new guideline represents a 73% reduction from the previous limit of 7.5 billion introduced way back in 2014. 

Why the new policy matters: In recent times, deposit money banks have been reluctant to lend to the key sectors, a trend which the CBN is determined to put an end to. Hence, the aim of the latest directive is to unlock the credit market, whilst making funds available to the real sector which, currently, is starved of funds. Ultimately, this will encourage lending activities and stabilise as well as encourage economic growth.