Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi
The
Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, spoke to
journalists in Abuja after this month’s Monetary Policy Committee
meeting on the challenges facing the financial sector. IFEANYI ONUBA was there
The CBN has just
introduced a 50 per cent Cash Reserves Requirement on public sector
deposits. Why was this introduced and what was is it meant to achieve?
First of all, you’ve got liquidity in
the banking industry. As I speak to you, we’ve got over N1.3tn or so
sitting in the banks belonging to government agencies. This is at zero
per cent interest and the banks are lending about N2tn to the government
and charging 14 per cent. Now, that’s a very good model, isn’t it? Give
me your money for free and I lend it to you at 14 per cent. So, why
would I go and lend to anyone?
Now, if you want to discourage such
perverse behaviour, the first thing is to take away that money and the
reserved requirement is to make sure that the excess liquidity in the
bank’s balance sheet (is taken away). It is just about six or seven
banks that really account for the bulk of this and we are not going to
put them in distress.
Secondly, this is just the beginning. If
there continues to be spending, and we are concerned about liquidity
conditions, we foresee in the future a continued increase in the Cash
Reserves Ratio as we continue to maintain tight liquidity conditions.
Election year is everywhere not just
only in Nigeria but everywhere in the world. And in every election year,
politicians spend money and spending money means pressure on exchange
rate and pressure on inflation.
So the next 12 months would be
difficult, we would have to respond at every stage and make sure that no
matter what happens, we do not have stability pressures. So, this is a
first step in addressing one major chunk. We have done it on the public
sector deposits and then probably if the government, for instance,
decides that the public sector account should come back to the central
bank, then the CRR will be reviewed on that. But if it is out there,
then CRR is 50 per cent. It is a form of tightening as it would help the
exchange rate and hopefully, it is also an appropriate monetary
condition when you have a rise in fiscal spending. We have done that
without increasing the MPR and it’s also a cost effective way of
managing money for us. It’s time for us to begin to share the cost of
monetary management.
During the last MPC, you expressed
concern about the credit growth to the public sector while that of the
private sector was declining, thus crowding out the private sector. Has
the CBN been able to do something about this?
As far as the credit growth is
concerned, it is not a unique Nigerian problem. The United States,
Europe and everyone is contending with credit growth. It is usually what
happens after a crisis; you repair the balance sheet of banks and put
the money in the balance sheet of banks and it takes time for banks to
begin to lend. And the growth in credit would have to be accompanied by
the progress on the structural side and the progress on the fiscal side.
There has to be government spending in the right areas and the right
policies to attract investment and create viable private sector
counterparties.
So, there have been growth but it is not
anywhere near where we want it to be. We will continue to encourage the
banks to lend and we will continue to take measures that will reduce
the perverted incentives that lead to crowding out. This is because if
banks can get cheap money from the government and turn round and lend it
to the government at high rate of interest, the incentives for them to
either halt private sector deposit or lend to private sector are not
there.
You recently appeared before the
National Assembly over issues of illegal charges by some banks and you
told them you were not aware of some of these charges. Did you discover
anything during your investigations?
On the National Assembly, I don’t think
they were talking about illegal charges but the N100 maintenance fee and
I wouldn’t call it illegal at all. We do have guide-to-bank charges and
there is an agreement that any bank that wants to charge anything
outside the charges must have the approval of the central bank. We did
say we were not aware because no bank has approached us. The particular
banks that were mentioned in the resolution were there and made a
presentation where they said they were not charging.
Now that inflation is down and
there is macro-economic stability, when should the people expect a
reduction in the Monetary Policy Rate?
You know this question of reducing MPR
is not just about where inflation is but where we think it’s going to
be. There are two major concerns before us now. The fiscal position of
government is a big problem. The deficit in the first half of this year
is over N400bn compared to just over N200bn last year. We have drawn
over N700bn from the Excess Crude Account in the federation and at a
time when the government is borrowing more and saving less, you don’t
expect the monetary authority to lower the interest rates.
The second thing is that we’ve got
fragile financial markets with a lot of money in the portfolios, which
means that at the first sign of shock in April, May and June, you begin
to have outflows that will put pressure on reserves and currency.
For this reason, we think we’ve got
elections coming up and a lot of government spending in an election
year. So, the outlook for us suggest we should hold on for now. I had
said this before that there was a likelihood of rates going up than
rates coming down in the immediate future.
Can you explain the submission of the CBN accounts to the Financial Reporting Council?
The central banks had been pushing for
banks to move to IFRS and we are also aware of the dearth of skills
around the IFRS accounting. We encouraged the banks to make
contributions to the academy. These contributions were given to the FRC
and to the best of my knowledge, the money is still there and it is
going to be used for the purpose of that academy.
We strongly support the IFRS academy and we strongly support building capacity in the industry for compliance.
On our accounts, the FRC does not
approve our accounts. The board of the central bank had approved our
account. The FRC is there to set accounting standards and to make sure
they are improved upon to meet international best practices. We
published the accounts and the FRC had comments on those accounts. They
will take those comments and we will take on board anything because they
are the regulator as far as preparing financial statements is
concerned. And just like banks respect our own regulatory arena, we
respect the FRC in its own regulatory arena.
So, there is no question at all about
the non-approval and I am not even aware of any issues that have been
raised. I will like to put an end to all that speculation. There is
nothing like FRC not approving our account. There is nothing like a
query on our account and there is nothing like complaints about IFRS
academy. The FRC did not force the banks but we are the ones that
encouraged the banks to make contributions to the academy.
How does fake naira note get to the ATM machines?
The fake naira note on ATM machines is
really an operational issue. Banks are supposed to process the currency
before they put it into the ATM machines. And if they process, their
machines should identify fake notes. So, if you find a fake note in an
ATM machine, somebody in the bank didn’t do what he was supposed to do
and they just put in notes that were not processed. There is also the
possibility that you go to an ATM machine that receives and pays and
maybe the sensors are not working. So, the machine should reject fake
notes that are fed in from outside. These are purely operational issues
and the deputy governor, operations is working with the banks to make
sure the problem is addressed.
0 Comments