- Moves to boost economic growth
BY COBHAM NSA, ABUJA – The Central Bank of Nigeria (CBN) says Deposit Money Banks (DMBs) will no longer enjoy any special interest on their daily placements at the Standing Deposit Facility (SDF) that exceed N2 billion.
Effective from Thursday, July 11, 2019, the new policy direction on remunerable daily placements by banks is captured in a circular titled “Guidelines on accessing the CBN Standing Deposit Facility”.
Signed by the Director, Financial Markets Department of the CBN, Angela Sere-Ejembi, the circular was communicated to all financial institutions in the country on Wednesday, July 10, 2019
According to the circular, “With reference to the circular to all banks and discount houses, Re: Guidelines on accessing the CBN Standing Deposit Facility, Ref: FMD/DIR/GEN/CIR/05/020 and dated November 6, 2014, after further review, the remunerable daily placements by banks at the SDF shall not exceed N2bn.
“The SDF deposit of N2bn shall be remunerated at the interest rate prescribed by the Monetary Policy Committee from time to time.”
It further explained that; “Any deposit by a bank in excess of N2 billion shall not be remunerated”, adding that; “The provisions of this circular took effect on July 11, 2019.”
The CBN had, in the initial circular issued on November 6, 2014, observed that banks and discount houses had preference for keeping their idle balances at the CBN in the SDF, thereby constraining the process of financial intermediation.
Focused on encouraging DMBs to improve on their lending activities to the productive sector of the economy, the reviewed operational guidelines for the SDF stated that the remunerated daily placements by banks and discount houses at the SDF should no longer exceed N7.5 billion and remunerated at the SDF rate of 10 per cent per annum.
In reducing the amount of excess cash that banks, including discount houses, can henceforth lodge with it under the SDF platform, CBN insiders said the policy aims at encouraging lenders to look more at channeling funds to boost productive activities in the nation’s economy.
The amount was reduced by 73.3 per cent to the new ceiling of N2 billion from N7.5 billion that has been operational since year 2014.
The CBN recently challenged commercial banks to raise their loan-to-deposit ratio to about 60 per cent by September 2019 or risk industry’s sanctions as part of measures to boost loans to the real sector and bolster growth in the economy.