FG to Cut Deposits in Banks over their Refusal to Lend to Nigerians

The federal government said that it might be forced to cut her deposits with Deposit Money Banks (DMBs), otherwise commercial banks in the country over their reluctance to grant loans to agricultural, mineral resources and small and medium enterprises sectors of the economy.

President Goodluck Jonathan who expressed his government’s dismay, said that banks were not doing enough to support the real sector despite the policies and other measures provided to create an enabling environment for them to thrive over the years.

The President spoke at the opening session of the 7th Annual Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja, Tuesday.

Represented by Dr. Yerima Ngama, minister of State for Finance, Jonathan, warned that unless they increase their funding to these critical sectors, government might be compelled to reduce their access to public sector deposits.

Public sector deposits in banks are currently estimated at about N2 trillion but the Central Bank of Nigeria’s  (CBN) decision to increase their Cash Reserve Requirement (CRR) for public sector deposits to 50 per cent, as part of the monetary tightening mechanism, had already reduced public funds available to banks to trade with.

The apex bank has intervened through financial intermediation support initiatives such as the Commercial Agricultural Credit Scheme (CACS), and Nigerian Incentive-Based Risk Sharing System for Agricultural Lending, NIRSAL.

The President noted that the banks were getting money from the government at zero interest rate but continued to deny the productive sector the required funding support.

He added that if the banks failed to play their roles, the government might withdraw its deposits in the banks and use a substantial part of the fund to support the productive sector.

Describing the oil sector as external to the economy (because there is little it is drawing from Nigeria to create wealth), Jonathan expressed desire for the banks to jointly do more in agricultural lending, which he noted remained too low to achieve the Agricultural Transformation Agenda’s (ATA), goals of making Nigeria a net exporter of food and catalyst for job creation in the economy.

He said: “The banks have to come together and see how they can put funds together to really support the farmers. “The statistics we have coming from the Central Bank is that when you lend to farmers they pay you. I think we have First Bank’s experience where the percentage of the nonperforming agric loans to performing is less than 1.5 per cent.

“So, the poor actually pay their loans, but why are the banks always eager to go and lend to the riskier businesses than this safe agricultural businesses? “The issue is with our psyche, we think that maybe they are not high tech or maybe there is too much documentation based on a loan of N50,000 or N100,000.

But as a nation, you have to look at it as your responsibility. We owe this nation; we have to rise to that challenge and see that the banking sector should come together with a solution and no longer wait for the Central Bank to be coming with the solution.

“But if we want to believe that the banking sector is not innovative, that it is not ready to come with solutions and they are always looking for government and they are always looking for the Central Bank to do the magic, I am saying that time is running out and people are not patient,” the President warned.

Noting that the banks needed to do more in lending to the agricultural, solid minerals and real sector as a corporate imperative, the President said unless they played their roles in a manner that suggests their readiness to support the nation’s economic development objectives, the CBN may have to introduce new policy measures that would deny the banks continued access to government deposits.

Mr. Segun Aina, president of the CIBN,  had in his remarks re-assured the government of the institute’s readiness to partner government in its various initiatives aimed at deepening banking knowledge and improving delivery of top class financial services to the economy

He expressed the hope that the conference would serve as a veritable platform for players in the industry to explore, share experiences and identify strategies to be pursued in ensuring that the financial services industry effectively plays its expected roles in supporting economic development.