Zenith Bank Plc and Citigroup Inc. are among the banks that are the worst hit among 12 banks that the Central Bank of Nigeria (CBN) has just fined NGN 500 Bn (USD 1.4 Bn) for basically failing to lend enough.
Three months ago, the CBN issued a directive to Nigerian banks stating that all banks are expected to have their loans-to-deposit ratio (LDR) at 60 percent by September 30. The CBN also threatened penalties on banks that failed to adjust their numbers.
And for several months, Nigerian banks have been caught in some kind of “lending fever” as the CBN’s deadline loomed. The banks were basically trying to outdo one another in the “who can lend the most” contest.
Well, the day of reckoning has finally come and some banks are getting the stick for failing to meet up with the new LDR margin.
According to a circular issued by the CBN to the affected institutions, Zenith Bank, Citigroup, Guaranty Trust Bank (GTB), United Bank for Africa (UBA), and the local unit of Standard Chartered are among banks that will have to pay a steep fine.
FBN Holdings Plc’s First Bank Plc and FCMB Group Plc are also among the banks that have been hit with the CBN’s fine.
The banks will have to transfer the funds to non-interest bearing accounts at the apex bank.
Of the five biggest domestic banks in Nigeria (also known as the “FUGAZ” banks), only the lending unit of Access Bank Plc met the minimum threshold stipulated by the CBN.
And it sure doesn’t look like there will be any let up for the banks in the near future as the CBN has indeed upped the ante.
Indeed, this Monday, the “bank of banks” ordered lenders in the country to get their LDR to 65 percent by the end of the year or face penalties. And if anyone thought the CBN was bluffing, the latest fines issued to defaulters of its initial deadline should dispel any doubts.
The latest move by the CBN is among a set of regulations aimed at forcing banks to boost credit — mainly to farmers, SMEs, and consumers. It’s all part of a play aimed at fostering the vision of aggressive economic growth targeted by the current administration.