CBN Charged Zenith Bank, GTBank, Access Bank, others N8.3 trillion in 2020
- GTBank, other Nigerian banks lose N8.3 trillion to the Central Bank of Nigeria in line with the cash reserve ration
- The amount increased from N5.2 trillion in 2019, to N8.3 trillion last year as banks become wary of increasing non-performing loans
- The debit is a sanction placed on GTBank, Zenith Bank, Access Bank and other listed companies on the Nigerian stock market
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Deposit money banks lose N8.3 trillion to the Central Bank of Nigeria (CBN) as the apex bank maintain its strictness on Nigerian creditors in 2020, as banks face sanction over loan-to-deposit ratio.
The financial regulator has been penalising lenders that refuses to increase their borrowing to small businesses and the real sector since it introduces the loan-to-deposit ratio in 2019.
The N8.3 trillion was deducted from Guaranty Trust Bank, Zenith Bank, Access Bank, United Bank of Africa, First Bank and other listed financial institutions in the capital market through the cash reserves ratio which was increased from 22.5% to 27.5% in January 2020.
The CRR is used by the CBN to debit a percentage amount from the banks, preventing them from having access to the funds. The regulator linked this monetary policy tool to the loan-to-deposit policy which forces banks to lend to its entrepreneur customers.
The loan-to-deposit ratio is put at 65%. For every quarter a bank fails to reach that percentage, the apex bank debit 27.5% from the vault of the banks, limiting cash available for investment and profit.
Source: Getty Images
This tactic by the CBN has increased the amount of credit approved by Nigerian banks to support small businesses and the manufacturing sector. However, banks are also cautious of their lending power as non-performing loans rises.
This contributed to the increase in cash reserve debited by the regulator last year, which went up to N8.3 trillion from N5.2 trillion debited in 2019.
Meanwhile, Legit.ng had earlier reported that Appzone, a Nigerian financial software company, raised $10 million from five local and international venture capitalists in a series a round.
CardinalStone Capital Advisers led the fundraising round, with V8 Capital, Lateral Investment Partners, Constant Capital, and Itanna Capital Ventures contributing to the capital.
This takes the startup's capital raised to about $25 million since it began operation in 2018. The company had secured $15 million prior to the new fund from its existing investor, CardinalStone and others.
Source: Legit.ng
