CBN Governor, Sanusi Lamido Sanusi
By Obinna Chima
The Central Bank of Nigeria (CBN) has said that any Deposit Money Bank (DMB) or Discount House that obtains funds from its lending windows is not allowed to simultaneously place funds in the inter-bank market.
According to the banking sector watchdog, any institution that contravenes the policy would be suspended from its money market window. In addition, the apex bank said that any institution that flouts the policy would forfeit the profits it would have made on such transactions.
The CBN stated gave this warning in a circular with reference number: “BSD/DIR/GEN/LWR/05/047,” addressed to all banks and discount houses.
The circular titled: “Revised Guidelines for Accessing CBN Lending Windows and Repo Transactions,” July 26, 2012, was signed by A.O. Idris, on behalf of the CBN’s Director, Banking Supervision.
It said that the decision was taken in order to ensure effectiveness of monetary policy.
The regulator explained: “As part of the process of unwinding the extraordinary measures introduced in the wake of the global financial crisis and to ensure the effectiveness of monetary policy, any DMB/Discount House that obtains funds from any CBN lending window is not allowed to simultaneously place funds in the inter-bank market.
“Deposit Money Bank/Discount Houses that also place funds in the inter-bank market are not allowed to concurrently access the window. Any institution that contravenes any provision of this circular will be suspended from CBN’s money market window. In addition, the institution shall forfeit the profits it would have made on the transactions.”
According to the CBN, the circular takes effect and supersedes all others relating to the above subject.
The CBN’s Monetary Policy Committee (MPC) had noted that the slowdown in global economic activities would have serious implications on the Nigerian economy in the following respects –“a softening in the demand for oil and consequent decline in oil revenues; reduction in forex earnings which would impair the build-up of external reserves and consequently exert pressures on the exchange rate; increased budget deficit as government would not be able to realise its revenue projections; and increased public sector borrowing to finance expenditure outlays.”
The committee had also noted that the inflation environment remained uncertain with the possible pressures coming from the core component in the medium term.