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CBN to punish defaulting banks on loan target


.Targets nine per cent inflation by 2020

The Central Bank of Nigeria (CBN) yesterday said banks that fail to meet its directive on 60 per cent loan to deposit ratio will be sanctioned by October 1.

CBN Governor, who spoke in London, said most of the banks have obeyed CBN’s directive to raise loan-to-deposit ratio to 60 per cent and those that fail to do so will face penalties.

The  CBN loan to deposit loan policy  policy is expected push banks to increase lending to high risk-borrowers, with the potential of incurring heavy losses and higher non-performing loans.

Based on the CBN guidelines, failure to meet the minimum loan to deposit ratio of 60 per cent by October 1 will result in a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target.

Emefiele also said the CBN wants to see inflation at nine per cent or below inflation before considering cutting its key rate, and that will likely only happen next next year.

“How soon do I see interest rates coming down? I’m not seeing that coming this year,” Emefiele said in an interview with Bloomberg TV in London . “During the course of 2020 we may be able to see that, but I can’t see that until we begin to see the numbers showing inflation is trending downward.”

The CBN held the monetary policy rate at 13.5 per cent last week for the third straight meeting after surprising the market in March with the first cut since 2015. While inflation in Africa’s largest oil producer has slowed from as high as 18.7 per cent in January 2017 to 11 per cent in August, it’s been outside the target band of six per cent to nine per cent for more than four years.

“Unfortunately it’s been sticky coming downwards as soon as it hit about 11 per cent,” Emefiele said. “The Monetary Policy Committee would love to see it at about nine per cent before beginning to aggressively thinking about easing”.

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