CBN tightens noose on banks, classifies NNPC, JVCs as public funds

As the effects on the implementation of the 50 percent Cash Reserve Ratio (CRR) on public sector deposits bite harder, the Central Bank of Nigeria (CBN) is further tightening the noose on banks by directing that deposits from Nigerian National Petroleum Corporation (NNPC) joint venture accounts, sovereign investment funds, be treated as public sector funds.

This directive also affects deposits from ministries, departments and agencies (MDAs), and companies’ collection accounts such as: Customs, Federal Inland Revenue Service (FIRS), and the Pilgrim Welfare Board, as well as all accounts belonging to government universities.

However, the CBN redefinition of public sector funds does not affect deposits from the government institutions such as Asset Management Corporation of Nigeria (AMCON), Bank of Industry (BoI), Nigerian Export-Import Bank (NEXIM), Federal Mortgage Bank of Nigeria (FMBN), Bank of Agriculture (BoA), and Bank of Infrastructure.

Other institutions to be excluded from the public sector funds include closed pension funds belonging to government institutions, state pension boards, government’s staff associations and co-operative societies.

Tokunbo Martins, director, banking supervision, CBN, in a letter to all banks released yesterday, said: “It would be recalled that in our circular under reference, DMBs were required to report government deposits as additional memorandum items in their Monthly Bank Return/Daily Bank Return (MBR 300/DBR 300) on e-FASS.

“Subsequent to the above, all DMBs are requested to note that, for the purposes of reporting in accordance with the provisions of the above circular, public sector deposits should include all Federal Government MDAs and Companies, State Government MDAs and Companies as well as

Local Government MDAs and their Companies.”

The CBN, under Sanusi Lamido Sanusi, in July took aim at the easy money at the disposal of Nigerian banks, as the apex bank introduced a 50 percent CRR on public sector deposits.

The higher CRR, which is the minimum balance the banks are expected to keep with the apex bank, is a tightening measure intended to check the present excess liquidity in the banking industry and stem the crowding out effect on private sector borrowing, as well as pre-empt potential increased government spending in the run-up to the 2015 elections.

Source: BusinessDay