Don’t Panic over Health of Nigerian Banks - CBN

Godwin Emefiele, governor, Central Bank of Nigeria (CBN), yesterday admitted that given the shocks in the economy currently, there is no doubt that the banking sector was facing its own share of the systemic stress, but argued that it did not translate to failure of any bank in the country.

Emefiele stated this yesterday during a press briefing after Monetary Policy Committee (MPC), meeting in reaction to questions from newsmen.

“Concerning the banking sector, the system is strong. When economy faces stress, the banking sector equally faces its own share of the stress, but it has not gotten to a point where anybody should panic.” Since 2009, the CBN has come out to say that no Nigerian depositor will lose money. We monitor the activities of the bank directors and owners, whenever there is indication that any bank managers are doing anything that would undermined the growth of any bank we step in and take action to ensure that whatever they are doing does not lead to negative position of such bank.” He said

Speaking on the decision of the committee members, Emefiele stated that the monetary policy rate (MPR) was increased to 14 percent from the previous 12 percent, retained the cash reserve ratio (CRR) at 22.50 percent, and the Liquidity Ratio (LR) at 30percent.

Emefiele, said five out of the eight members that attended the meeting voted in favour of monetary tightening.

The remaining three members, according to him, voted to hold the rate at 12 per cent.

The Monetary Policy Rate is the anchor rate at which the CBN, in performing its role as lender of last resort, lends to Deposit Money Banks to boost the level of liquidity in the banking system.

If the apex bank intends to increase the level of liquidity in the economy, it reduces the MPR but increases it when it intends to tighten money supply.

In taking the decision to increase MPR, the governor said the committee was faced with two policy choices whether to stimulate growth or to fight inflation.

He, however, said when considered from the standpoint that the primary mandate of the CBN is to maintain price stability, the committee decided to focus on its mandate by checking inflationary pressures.