CBN moves to cut commercial banks’ access to treasury bills, bonds

The monetary policy committee of the Central Bank of Nigeria (CBN) has directed that a regulatory framework that will limit the access of banks to bonds and treasury bills be put in place.

Godwin Emefiele, CBN governor, made this known in Abuja while addressing the press at the end of the committee’s meeting.

“Unfortunately, we have observed that rather than banks focus on granting credit to the private sector, they tend to direct their focus mainly on government securities,” he said.

“The monetary policy committee has frowned at that and has directed the management of the central bank to put in place regulation to restrict the banks from unlimited access to government securities.

“This country badly needs growth and for us to achieve growth, those whose primary responsibility it is to provide credit must be seen to perform that responsibility.

“That they would, rather than perform that responsibility to the private sector which is the engine of growth of an economy. Instead of doing that, they would rather channel their liquidity to other sectors of the economy is what the MPC frowns at.”

To reduce lending risk to the private sector, the CBN governor said another regulatory framework will be put in place to reduce the probability of non-performing loans.

“MPC has also directed management to think about a legal and regulatory framework to ensure that some of the credit risks, with giving credit to the private sector that ultimately results in non-performing loans should be mitigated so that the probability of NPLs increasing is moderated,” he explained.

According to Emefiele, the rate of non-performing loans is 10% at present; down from 17% in 2016.

Since the economy slipped into a recession in 2016, the Debt Management Office (DMO) has been issuing bonds to cater to the budget deficit and infrastructure funding. These bonds are issued at a double-digit interest rate to make them attractive to subscribers.