Lagos – An economist, Prof. Sherrifadeen Tella, on Wednesday advised the Central Bank of Nigeria (CBN) to penalise banks that would not comply with its new direction on lending rates.
The experts made this suggestion in an interview with the News Agency of Nigeria (NAN) in Lagos.
“Some banks are not willing to comply with CBN directives on lending rates. They have all sorts of inbuilt costs to interest rates. They should be penalised
“It will be counterproductive for the CBN to try to stimulate the economy only for some banks to frustrate its efforts’’
Tella, a lecturer in Economics at Olabisi Onabanjo University, Ago-Iwoye, Ogun, said that it was only in Nigeria that banks had high level of liquidity and yet had high lending rates.
He, therefore, advised that the CBN should ensure that erring commercial banks were penalised to serve as deterrent to others.[pro_ad_display_adzone id=”70560″]
Mr Femi Ekundayo, a former banker, also advised that the CBN should closely monitor banks in the implementation of the new monetary policy rates.
Ekundayo, a former President of Chattered Institute of Bankers of Nigeria (CIBN), said that most advanced economies operated on single digit lending rates.
Ekundayo said that the current reduction in the MPR was an indication that attainment of single digit lending rates in the country would not be a mirage.
“Most developed economies operate at single digit lending rates. The lower the MPR, the greater the prospect of our attaining single digit lending rates.
“The MPC resolution is an indication that the prospect of Nigeria attaining a single digit lending rate will not be a mirage,’’ Ekundayo said.
According to him, the reduction of the MPR and the CRR couldn’t have come at a better time than now when banks were bracing up with the challenges of the Treasury Single Account (TSA).
Ekundayo, who is also a former president of the Institute of Directors of Nigeria (IOD), said that the TSA was capable of creating some liquidity challenges in the banking sector.
He said that the reduction of the MPR and the CRR would cushion the effects of the TSA in the long-run.
The former banker urged stakeholders to watch the performance of the economy in the coming months in order to see the justification and sustainability of the new interest rate regime.
“Low rates will encourage borrowing. We need to monitor closely the economy in the coming months to see the effect of the reduction on banking operations,’’ Ekundayo said.
NAN reports that the apex bank rose from its 104th MPC meeting with a resolution to reduce the MPR from 13 per cent to 11 per cent and the Cash Reserve Ratio (CRR) from 25 per cent to 20 per cent.
The CBN cited the need to stimulate the economy for growth and to free liquidity to create employment, among others, as the reasons for the reduction of the rates. (NAN)