CBN deserves praises for sanctioning banks failing to meet Loan-to-Deposit Ratio requirement -Kurfi

A seasoned stockbroker and the Managing Director of APT Securities and Funds Limited, Mallam Garba Kasimu Kurfi, has praised  the Central Bank of Nigeria (CBN) on its efforts at compelling banks operating in the country to be granting loans to businesses to ensure  the speedy  recovery of the nation’s economy.

In an interview with Business247News, Kurfi recalled how The Central Bank of Nigeria (CBN) recently deducted N1.4 trillion from the banking sector’s Cash Reserve Requirement (CRR) as Nigerian Deposit Money Banks (DMBs) failed to meet the 65 per cent Loan-to-Deposit Ratio (LDR) at the end of March, 2020.

It will be recalled that Zenith Bank ranked the highest with about N355.9 billion while FBNH and UBA came second and third with N208 billion and N204 billion respectively. Stanbic IBTC came forth with N143.9 billion while Standard Chartered came fifth with N120.6 billion deductions.

According to him, “the CBN is for the economy and it is like that the world over. Wherever you see an economy growing it is because there is borrowing and lending. You cannot borrow when you are talking about double digits interest rate and why most of our banks decided to sit on the deposit and just buy Treasury bill or federal government bond and make money rather than investing into the economy so that the economy will recover faster.

“What the CBN did recently by removing billion dollars from the banks for not meeting the loan deposit ratio target is very good so that it will encourage banks to look at the viable projects and start lending to them because by the time they fund these projects, you would see more activities, more production more employment and the economy will grow better and faster. So, we need economic growth that will accelerate our position so that we’ll recover faster.

“Don’t forget by the end of the first quarter of 2020, our GDP growth was 1.82% and this is about 23 to 28% lower compared to our Q4 that is December, 2019 performance. Nobody wants the economy to continue going down. Now, they are even predicting that we are likely going close the year in the negative, so when the CBN insists that fund this economy, banks they know all these businesses and the private businesses always approach bank for loans so now when they know that if you don’t lend, the CBN mops that money and penalise you, they have no choice than to start lending and once they start lending, I can assure you that the economy will recover faster and better.

“We need it in a single digit as most of our economic sectors both the small scale and the medium scale and the large scale need money. They are lacking enough capital to move them faster and better, so if they can get it at a cheaper rate, they would do it and therefore the banks have no choice than to identify the viable projects and fund them so that the economy will be better and the issue of unemployment will become a thing of the past because when there is economic growth there will be more employment and more activities and the economy will be better.So, for me, yes, by penalising them for this, it enhances their performance.

“What the CBNis telling the banks is that you can make more money by lending not only by just buying Treasury bill and bonds.  If you lend your money, you are free from CBN sanctions. So you cannot go out and source deposit which could have been invested in the economy, the owner decided to save it into the bank and the banks refuse to lend it to the borrower.  So what the CBN did is right and I believe it’s for the better economy.  Banks make money by lending even though we had COVID-19, manufacturing was shut down for almost two months, but the banks for the money they lent are still accruing the same interest. So, you can see, if you want to know this, borrow money  from banks, you will know that you work for them more than for yourself”.