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CBN Debits N459.7bn from 26 Banks For Failing to Meet CRR Target

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  • CBN Debits N459.7bn from 26 Banks For Failing to Meet CRR Target

The Central Bank of Nigeria has continued to enforce its 27.5 percent Cash Reserve Ratio (CRR) across all banks.

According to a Nairametrics report, the apex bank debited a total sum of N459.7 billion from 26 banks, including merchant banks, on Thursday for failing to meet the CRR target.

Some of the banks affected were United Bank for Africa Plc, First Bank of Nigeria Ltd, Zenith Bank Plc and First City Monument Bank Limited debited N82.3 billion, N59.3 billion, N50 billion and N45 billion, respectively.

While Guaranty Trust Bank Plc was debited N40 billion. See the complete list of debited banks below.CRR DebitThe central bank-led monetary policy committee had left the CRR unchanged in the last monetary policy meeting held in May to mop up cash in circulation and better manage the rising inflation rate.

In order to ensure banks maintained a 27.5 percent cash reserve ratio, apex bank then imposed fine to check the activities of the bank. A move most bankers attributed to falling foreign reserves and the central bank’s method of reducing banks’ forex demand.

An anonymous banker, who preferred not to be mentioned, said “You know the central bank also does what we call retail FX intervention, that is when they sell FX to corporates. Now, because they don’t want banks coming with huge demands, what they do is that a day before the FX sales, they debit the banks so that the naira you have available is small and you cannot put them under pressure because of your FX demands. That has really been the driver.

This was coming barely a month after the apex bank debited N1.4 trillion from the nation’s banks in April. According to the banker, between April and June, CBN has carried out minor CRR debits before Thursday’s debit.

“We understand that the central bank had set up a special CRR team that is supposed to monitor banks’ CRR once a month. But now, the team monitors banks’ CRR on a weekly basis. This is why the central bank is effectively debiting banks on a weekly basis. Some weeks ago, they debited some banks about N1.4 trillion. That was one of many. Between that time and now, there have been more debits that have happened. But the debits that are huge/significant are what is troubling the banks. There was a N300 billion that happened about two weeks ago. and then yesterday that was this N459.7 billion that was also debited.

“These are huge amounts that are leaving the banking sector. It’s a squeeze on the banks. A bank like First Bank, for instance, has about N1.4 trillion in CRR with the Central Bank. And there is Zenith Bank with equally as much as N1.5 trillion. These are monies that banks can potentially put in loans at 52% at 30%, or even put in money market instruments at maybe 10%. So, for a shareholder of these banks, this CRR debits are impairing the banks’ ability to increase their earnings because now are not able to use the funds that are legitimately theirs to create money for their shareholders. And the question is that under what framework is the Central Bank choosing to take people’s money?”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

States Debt Rises by 163 Percent -BudgIT

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Debts of All 36 States Rise by 163 Percent or N3.34 Trillion to N5.39 trillion Between 2014 and 2019

Debts continue to rise across the 36 states of the Federation, according to a recent report by BudgIT, a public sector-focused financial information house.

In the just released 2020 edition of its annual state of states report titled, “Fiscal Sustainability and Epidemic Preparedness Financing at the State Level”, BudgIT said debts rose by 162.87 percent or N3.34 trillion from N2.05 trillion in 2014 to N5.39 trillion in 2019 across the 36 states.

The report stated that 10 of the states incurred half or N1.68 trillion of the entire debt, adding that seven of the 10 states are from the South while three are from the North.

Speaking on how states can attain fiscal sustainability, Damilola Ogundipe, BudgIT’s Communications Lead, said: “States need to grow their Internally Generated Revenue, IGR, as options for borrowing are reduced due to debt ceilings put in place by the Federal Government to prevent states from slipping into debt crisis. There has to be a shift from the culture of states’ overdependence on Federation Account Allocation Commission, FAAC.

The report further stated that 13 states, including Lagos, Oyo, Kogi and others, were unable to fund their recurrent expenditure together with debt repayments due in 2019.

It stated: “From our 2020 State of States analysis, 13 states were unable to fund their recurrent expenditure obligations together with their loan repayment schedules due in 2019 with their respective total revenues. 

“The worst hit of these 13 states are – Lagos, Oyo, Kogi, Osun and Ekiti states while the other states on this pendulum are Plateau, Adamawa, Bauchi, Gombe, Cross River, Benue, Taraba and Abia. 

“Furthermore, of the remaining 23 states that can meet recurrent expenditure and loan repayment schedules with their total revenue, eight of those states had really low (less than N6 billion) excess revenue, that they had to borrow heavily to fund their capital projects. 

“The worst hit are Zamfara, Ondo and Kwara who had N782.45 million, N788.22 million and N1.48 billion left, respectively. 

“Based on their fiscal analysis, only five states – Rivers, Kaduna, Akwa Ibom, Ebonyi and Kebbi states – prioritised capital expenditure over recurrent obligations, while 31 states prioritised recurrent expenditure according to their 2019 financial statements.”

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Oil Marketers Says No to Labour Strike, Decries Over N320bn Losses

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Oil Marketers Reject Labour Strike, Decries Over N320bn Losses

Oil marketers across the country have rejected labour’s planned strike over N320 billion worth of investment losses.

The marketers under the aegis of the Natural Oil and Gas Suppliers Association of Nigeria also kicked against the proposed industrial action by the Nigeria Labour Congress and other civil right groups, pleading with the union and allies to have a rethink and look into the situation from a bigger picture.

This was after labour and other civil right groups announced they would be embarking on a nationwide strike starting from September 28, 2020 to force the government to reverse the increase in pump price and electricity tariffs.

Labour had said the government remained insensitive to the plight of Nigerians despite the negative impacts of COVID-19 on the economy and Nigerians.

However, Ukadike Chinedu, the association spokesperson of Natural Oil and Gas Suppliers Association of Nigeria, who was quoted in a statement issued in Abuja, said members of the association may be forced to cut staff in an effort to reduce operating costs given current economic realities.

He said, “Some of our concerns are heavy losses of over N320bn investments from product purchases at government specified prices and sales at compelled price reductions, which could not be justified by the costs of transaction.”

Ukadike added that several oil businesses were no longer trading because of heavy losses and several others were dying in silence.

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Banks’ Credit to Economy Hits N19.33 Trillion in August

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Deposit Money Banks Credit to Economy Rose to N19.33 Trillion in August

The total credit facility to the economy rose to N19.33 trillion in the month of August.

The Central Bank of Nigeria-led monetary committee disclosed on Tuesday after the nation’s monetary policy committee meeting.

The committee attributed the improvement to the 65 percent loan-to-deposit ratio policy implemented to compel the nation’s deposit money banks to join central bank efforts at growing the real sector of the economy.

Godwin Emefiele, the Governor of the Central Bank of Nigeria, who spoke during the meeting said “The bank’s policy on Loan to Deposit ratio also resulted in a significant growth in credit to various sectors from N15.57tn to N19.33tn between end-May 2019 and end-August 2020, an increase of N3.77tn.

“This growth in credit was mainly to manufacturing (N866.27bn), consumer credit (N527.65bn), oil and gas (N477.65bn), agriculture (N287.11bn) and construction (N270.97bn).”

On monetary aggregates, broad money supply (M3) rose to 6.93 per cent (year-to-date) in August 2020 from 5.23 per cent in July 2020, reflecting the increase in both Net Foreign Assets and Net Domestic Assets.

He said total domestic credit grew by 6.94 percent in August 2020, lower than the 9.43 percent recorded in July 2020.

The committee reduced the nation’s benchmark interest rate by 100 basis points to 11.5 percent, down from the previous 12.5 percent.

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