The Nation Newspaper

Tag: cbn

  • CBN mops up N190b via T-bills

    CBN mops up N190b via T-bills

    The Central Bank (CBN) last week issued treasury bills (TBs) worth N190 billion as part of monetary control measures to help banks manage their liquidity. The apex bank said it plans to raise N917.76 billion from TBs in the second quarter of the year. The is N40 billion more than it had initially offered at the auction, data from the CBN showed.

    The demand for Nigeria’s local debt since the beginning of the year has been high due to attractive yields. Yields on the 91-day and 182-day notes were broadly unchanged while the returns on 364-day paper edged up marginally compared with the previous auction on February 20.

    The bank sold N32.97 billion in 91-day paper at 9.2 per cent, same as at the previous auction on February 20, N40 billion in the 182-day bill at 9.44 per cent, compared with 9.45 per cent at the previous auction.

    A total of N117.12 billion of the 364-day bond was sold at 9.98 per cent, higher than the 9.45 per cent at the previous auction on February 20. Nigeria had originally planned to sell N50 billion in 182-day notes and N67.12 billion in 364-day paper at the auction.

     

    Interbank rate

     

    The inter-bank rate remained steady on March 7, reflecting CBN’s effective/aggressive liquidity management efforts. Call overnight rate remained steady on 10.25 per cent, the seven-day money market rate fell slightly to 10.6 per cent. The three-month Nigeria Interbank Offered Rate (NIBOR) fell to 11.66 per cent though fewer activities are done on the tenor.

    The CBN liquidity management remained active and supported by the circular issued on 1 August, which reviewed guidelines on how banks access its Standing Lending Facility and forex auction.

    Naira

    The naira depreciated for the third time in four days after the CBN paid out maturing Treasury bills, boosting money supply and freeing up local currency for buyers to seek dollars. The currency of Africa’s biggest oil producer declined 0.1 per cent to 157.85 per dollar, paring a weekly gain to 0.1 per cent, according to data compiled by Bloomberg.

    CBN settled maturing bills amounting to N263.93 billion ($1.7 billion), the Financial Markets Dealers Association, said on its website. The institution sells bills to help manage currency supply within the market. “The maturities boosted money supply as they hit the market, making dealers more able to seek dollars,” Sewa Wusu, an analyst at Lagos-based Sterling Capital Ltd., said.

    The regulator held the benchmark interest rate at a record high 12 per cent for an eighth time on January 21 to control inflation and stabilize the naira. The nation’s inflation rate fell to 9 per cent in January from 12 per cent in December the statistics bureau said February 18.

    Yields on Nigeria’s $500 million of Eurobonds due January 2021 fell 20 basis points to 4.08 per cent. The yield on the country’s 16.39 per cent domestic bonds due January 2022 rose 24 basis points to 11.1 per cent, according to data compiled on the FMDA website.

     

    Forex inflows

     

    Provisional data on foreign exchange (Forex) flows through the CBN showed that inflow during the fourth quarter of 2012 amounted to $11.17 billion, representing a decline of 16.9 from preceding quarter, according to data obtained from the CBN website.

    Outflow amounted to $7.82 billion, showing a decline of 3.3 per cent in the preceding quarter and resulted in a net inflow of $3.35 billion, compared with a net inflow of $5.36 billion in the preceding quarter.

    The report said decline in inflow relative to the preceding quarter was attributed largely to the 9.6 per cent fall in crude oil sales, while the fall in outflow was attributed to the 35.2 per cent decline in Wholesale Dutch Auction System (WDAS) utilisation.

    Meanwhile, the invisible sector accounted for the bulk (32.9 per cent) of total forex disbursed in the fourth quarter of 2012, followed by mineral and oil sector (18.7 per cent). Other beneficiary sectors in a descending order included industrial sector (18.2 per cent), food products (15.5 per cent), manufactured products (10.1 per cent), transport sector (10 per cent) and agricultural products (0.2 per cent).

    Estimated forex demand by the authorised dealers in the fourth quarter stood at $4.28 billion, indicating a decline of 35.2 in the preceding quarter. The sum of $4.27 billion was sold by the CBN during the review period, indicating a decrease of 36 in the preceding quarter.

     

    Microfinance banks

     

    The CBN said that the National Microfinance Development Strategy will soon be released. The document is expected to outline modalities for developing the subsector and rules that operators will follow to achieve improved performance s well s sector’s stability.

    The apex bank is also working on consolidating on the achievements recorded so far by the country in the development of MfBs by strengthening the regulatory frameworks and other guidelines. This also includes formation of National Microfinance development Strategy with the United Nations Development Programme (UNDP) and the recent signing of a major agreement with the Alliance for a Green Revolution in Africa (AGRA).

    Besides, the CBN is considering the establishment of a Microfinance Development Fund (MDF) as a further step to deepen the financial market. The MDF when established would assist in addressing teething challenges of underfunding for microfinance institutions in the country.

    It will further complement past and current efforts aimed at strengthening the microfinance sub-sector of the financial system, improve financial inclusion and by implication, improve the nation’s Gross Domestic Product (GDP) rate significantly, the statement indicated.

     

    MSMEs

     

    The Federal Government disclosed plans to launch a new policy on Micro, Small and Medium Enterprises (MSMEs) in the country. The proposed draft policy document-the National Enterprise Development Programme (NEDEP) is expected to be formally inaugurated by the presidency after inputs by various stakeholders have been accommodated.

    Minister of Trade and Investment, Mr. Olusegun Aganga said the programme, which is aimed at creating a more robust and stronger SMEs sector is estimated to cost N10 billion annually and targets to create about 3.5 million direct jobs in 2013 as well as 5 million indirect jobs by 2015.

    Speaking in Abuja at a stakeholders’ meeting on the NEDEP, which was being spearheaded hosted the Federal Ministry of Trade and Investment and the Bank of Industry (BoI) in collaboration with the Small and Medium Enterprises Development Agency of Nigeria (SMEADAN), and the Industrial training Fund, the Minister said NEDEP was the solution to the currently loose and uncoordinated relationships among the various SMEs initiatives in the country.

     

    GDR

     

    The admission of Zenith Bank’s Global Depositary Receipts (GDR) to the official list of the London Stock Exchange (LSE) and trading same on the LSE is expected to take place within the month, Renaissance Capital (RenCap), an investment and research firm has said. “Our understanding from management is that the listing of the instruments should happen in March 2013,” it said in an emailed report obtained by The Nation.

    It said the objectives of the GDR issuance are to increase the bank’s visibility and trading in its securities, as well as to expand and diversify its investor base. “Given that Zenith Bank is the most highly capitalised Nigerian bank with a capital-adequacy ratio of 29 per cent as at last September, and does not require any capital injection, it makes sense to us that the GDRs are non-capital-raising,” RenCap said.

    The GDR issuance, it added, simply gives existing shareholders the option to convert to an LSE-traded instrument. The conversion ratio is 50 common shares to one GDR.

     

    Economic growth

     

    Nigeria economy grew 7.1 per cent in the fourth quarter, the CBN has said. Growth was 6.9 per cent in the previous three months and 7.7 per cent in the same period the previous year, the bank said in a report on its website, citing figures from the National Bureau of Statistics.

    The pickup was largely driven by industrial growth, with the non-oil sector expanding 8.2 per cent and accounting for 87 per cent of all output, the bank said. Agricultural “areas adversely affected by the floods during the second half of 2012 were yet to recover fully from the impact.”

    The fiscal deficit of the country rose to N420.8 billion or 3.9 per cent of economic output, in the fourth quarter. That compares with a targeted deficit of N284.1 billion for the period and a gap of N489.5 billion in the previous three months, the bank said. “The deficit was financed mainly from domestic sources, particularly through the issuance of additional Federal Government of Nigeria Bonds,” it said.

     

    Bank to bank report

     

    Ecobank Transnational Incorporated (ETI) revenue growth forecast for fiscal year 2013 has been pulled down to 16 per cent, from initial 19 per cent by Renaissance Capital (RenCap), an investment and research firm. The forecast is higher than management 15 per cent revenue growth target for the year.

    RenCap, in an emailed report obtained by The Nation, said that even if there is little improvement in the bank’s Net Interest Margin (NIM), management’s revenue-growth target implies a slower progression in non-interest revenues than it had previously assumed.

    Leaders of the African Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank, International Monetary Fund, and the World Bank Group have pledged close collaboration to support development and growth.

    In a statement, the institutions said there is need for coordinated efforts to achieve the Millennium Development Goals by 2015, which aim to end poverty and hunger, increase access to education and health care, improve gender equality, and ensure environmental sustainability.

    “Nothing could be more important than ensuring young people get the right start in life. We aim to make 2015 the year in which children no longer negotiate access to basic education, mothers to the most basic health care, households to water and sanitation, or girls to the most fundamental opportunities for schooling, work, or voice in their communities. And we aim to ensure these gains are permanently sustained in the post-2015 era” Donald Kaberuka, President of the African Development Bank said.

    A one story building comprising six classrooms, a multipurpose hall and other facilities financed by First City Monument Bank (FCMB) Plc at Baptist Model High School in Ikola-Ipaja, Lagos State has been commissioned. The construction, which began in middle of the year 2012, was financed by the bank to the tune of N20 million.

    Speaking at the commissioning of the school building, FCMB’s Zonal Head for Ojo-Alaba in Lagos, Mr. Endwell Brown, explained that, “FCMB is committed to supporting developmental projects and programmes that will benefit the larger society”.

    Skye Bank Plc said it had granted facilities amounting to $500 million to operators in the maritime industry in recent times. The bank’s General Manager, Corporate Banking (Maritime and Aviation sector), Mr. Segun Opeke, explained that the loan was part of its commitment to the development of the maritime industry in the country.

    He said the amount represents money provided to indigenous ship owners and other stakeholders for the acquisition of ships and other critical work tools needed to strengthen operation o the sector. Speaking at a forum of maritime stakeholders, Opeke said the bank was prepared to expand its credit lines to the operators to further develop the industry. According to him, the bank was responsible for the provision of credit facilities to indigenous ship owners for the acquisition of an estimated 50 per cent of the entire fleet in the country.

     

     

     

     

  • CBN to provide framework for banks’ corporate governance

    CBN to provide framework for banks’ corporate governance

    The Central Bank of Nigeria said it will provide the framework for good corporate governance to strive in the financial sector.

    The CBN Director, Corporate Communications Department, Mr. Ugochukwu Okoroafor, made this known in a chat with the News Agency of Nigeria in Lagos on Friday.

    Okoroafor said the apex bank had adopted the required measures to prevent poor corporate governance among banks

    He said the over capitalisation of the banks was part of the regulatory step to ensure that sanity returned to financial sector.

    The CBN director also said that the creation of the new banking model from the universal system would ensure that banks focused on their core investment.

    Okoroafor added that some of the banks used their subsidiaries to siphoned money.

    According to him, the introduction of zero tolerance in the financial sector will enhance good corporate governance and check imbalance.

     

     

  • External reserves didn’t exceed $67b under Yar’Adua – Sanusi

    External reserves didn’t exceed $67b under Yar’Adua – Sanusi

    The Governor of Central Bank of Nigeria, Malam Lamido Sanusi, has said the country’s external reserves never overshot the $67 billion mark during late President Umaru Yar’Adua’s administration.

    Sanusi said this on Tuesday in Lagos while speaking as guest speaker at the Metropolitan Club’s forum.

    He said the highest external reserves recorded during Yar’Adua’s regime was $62 billion, adding that the controversy surrounding the matter was unnecessary.

    The CBN governor added that the decline in the nation’s reserves was as a result of exigencies, stressing that governments worldwide spend part of their reserves whenever the need arose.

    “You save money when prices of oil are high and you spend when prices are low.

    “It is part of the excess crude account that we used to finance the oil subsidy,’’ the News Agency of Nigeria quoted Sanusi as saying at the forum.

    He said the spending of external reserves by the government was transparent and could be accounted for.

    He also said CBN was working with the Ministry of Finance to block all leakages in the system, and identified corruption as one of the major problems facing the country.

    The CBN governor explained that the reform agenda in all sectors would resort to sound economy in future.

    He urged Nigerians to join hands to fight corruption in all areas of the economy, saying this was the cause of distortion and destruction to the economy.

    ‘’We fought it in the banking sector and we can all see the positive results.

    ‘’However, it is not only banks that we have thieves. They are everywhere. So, other sectors should follow the CBN example,” he said.

  • CBN’s reforms spark interest in money market instruments

    CBN’s reforms spark interest in money market instruments

    There seems to be a positive side to the Central Bank of Nigeria (CBN) reforms going by applause from some experts.

    The experts said the reforms have sparked interest in money market instruments.

    The reforms, they said, had not only brought about safer, healthier and a more conducive investment climate, but have buoyed confidence in the industry.

    They said firms that could not wait for the recovery of the capital market are looking at money market instruments for growth. They do this by approaching banks for Bankers Acceptance (BAs), Commercial Papers (CP) and fixed deposits, among others.

    The Chief Executive Officer, CDL Assets Management Limited, Mr Bade Adeshina, described fixed-income securities, equities, estate and money market instruments as investment options prominent in the consideration of many firms.

    hE said his firm has invested Union Trustees Mixed Fund in four portfolios for growth.

    Union Trustees Mixed Fund is a varied fund pooled by investors to aggregate the potential in the financial markets.

    He said the fund has invested in money market instruments because of its safer and good yields.

    “As at April 30, 2012, 61 per cent of the fund was invested in money market instruments, 23 per cent in quoted equities, 15 per cent in the fixed income securities and one per cent, in the Real Estate Securities. These investment allocations were in accordance with the Trust Deed of the Fund.”

    He said investments in money market instruments, such as deposits and bankers’acceptance rose from N1.032 billion in 2011 to N1.188 billion last year.

    The Chairman, Anchoria Investment and Securities Limited, Dr Olusola Dada, said people were looking for more beneficial investment windows as the stock market recovers. He said the only appealing windows for investors is the money market, adding that the development ensures that people keep their money in banks at fixed interests, no matter how small they may be.

    “Though investors are investing in fixed-income securities, such as Bonds and Treasury Bills, investment in money market instruments is on-going, because people are looking for channels to make money in the short and medium term basis,” he said.

    The Chief Executive officer, TFS Finance Limited, Eddie Osaronkhoe, said short-term borrowers rely on commercial papers issued by banks to survive, adding that they get better yields once the banks are doing well.

    “Once there is an increase in the values of such financial instruments, it implies that the values of investments of banks are growing up. This will have positive effects on the credit flow to the economy. If the trend continues, economic activities will improve,” he said.

    “Bankers acceptance and commercial papers are used to execute various business ideas or plans. Anytime the financial instruments experience an increase in values, the banks capacity to record a reasonable profit margin improves as well,” he added.

    A former President, Association of National Accountants of Nigeria (ANAN), Dr Francis Ndukwe, said the issue is showing the increased capacity of banks to lend to the economy, adding that banks are improving on their lending , as their bad debts have been acquired by the Assets Management Corporation of Nigeria (AMCON).

    Ndukwe said the development is going to have spiral effects on the products and services offered by the banks. He said considerable economic benefits can be derived when the values of Bankers Acceptance, among other instruments, appreciate.

     

  • Why CBN cut lending risk to states, councils, MDAs by 100%

    Why CBN cut lending risk to states, councils, MDAs by 100%

    The Central Bank of Nigeria(CBN) raised the risk of banks’ lending to states, local governments, Ministries, Departments and Agencies (MDAs) by 100 per cent because of their failure to exercise due diligence during such transactions, it has emerged.

    The CBN is also worried by corruption in the process, sources said.

    The banks, it was learnt, found public sector lending quite attractive because of their ability to levy excessive fees on such transactions and also get the states to keep the Federation Account Allocation Committee (FAAC) account with them.

    Some banks were said to have failed to properly document their loans to states, leading to defaults and restructuring in many cases after a regime change.

    In a letter to banks and discount houses, Director, Banking Supervision, CBN, Mrs Tokunbo Martins informed banks of the hike in the risk weight assigned to direct lending to the public sector from 100 to 200 per cent.

    She said investments in the Federal Government’s bonds would continue to attract zero per cent risk weight. States bonds, that meet the eligibility criteria in the Guidelines for Granting Liquidity Status for State Government Bonds would continue to be risk weighted at 20 per cent.

    “Where the exposure to any industry economic sector (as defined by the International Standard Industrial Classification of Economic Sector as issued by the CBN) is in excess of 20 per cent of the total credit facilities of a bank, the risk weight of the entire portfolio shall be 150 per cent. Total exposure to a particular industry would include off-balance sheet engagements in which the bank takes the credit risk,” she said.

    The review of risk weights assigned to some identified exposures is without prejudice to the risk management control functions put in place by banks and discount houses to mitigate credit concentration risks, she said.

    Mrs Martins said the recent banking crisis highlighted several weaknesses in the system, key of which was the excessive concentration of credit in the asset portfolios of banks.

    “Past experience revealed concentrations across products, business lines, and legal entities. The management of concentrations, or pools of exposures, whose collective performance may potentially affect a bank negatively, needs to be properly managed through the establishment of sound risk management processes,” she said.

    “Without prejudice to the risk management control functions put in place by banks and discount houses to mitigate credit concentration risks, the CBN, in line with its risk-based supervisory review process has reviewed the risk weights assigned to some identified exposures. The risk weight assigned to direct lending to local governments, states, ministries, Departments and Agencies of Governments (MDAs) is increased from 100 per cent to 200 per cent,” she said.

    A senior banker with a first generation bank who craved anonymity, defended banks on the matter, saying there is nothing wrong in lending to the public sector. But, he said, when a bank fails to recover the loans before the tenure of the current regime expires, the priority of a new government will not be loans repayment. This, he said, is why a lot of public sector loans are not performing.

    “Banks are always reminded of the history of non-performing public sector credits, and are therefore strongly advised to exercise caution and set a more conservative threshold to avoid the mistakes of the past. This follows the CBN’s earlier directive to banks to limit loans to the public sector to 10 per cent of their overall credit portfolios, an apparent effort to divert more funds to the private sector,” he said.

    Already, banks are said to be lobbying CBN to relax the policy limiting their credit exposure to public sector.

  • Banks get guidelines

    Banks have been urged by the Central Bank of Nigeria(CBN) to consider environmental and social policies in their decision-making and lending. This is in line with the Sustainable Banking Practice being promoted by the banking watchdog.

    The sustainable banking practice, Special Adviser to the CBN governor, A’sha Mahmood, said, aims at minimising or mitigating the negative impacts of financial institutions’ operations on the environment and local communities in which they operate.

    It captures the Nigerian sustainable banking principle on agric, power and the oil and gas sectors.

    According to the regulator, for the successful implementation of the principles, the institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.

    “The adoption of the principles will not only help banks in mitigating the E & S risks associated with their business operation and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important.

    “They will also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices. The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles,” it added.

    Noting that the process of developing the sustainable banking principles and guidelines has so far been driven by the banks, the apex bank assured that it will create the enabling environment for banks to succeed in their implementation of the principles. The CBN has also recently set new rules for lending to the agricultural sector of the economy. This resolution stemmed from the reports from banks and discount house, which indicated that lending to the subsector remains a high-risk, which should be followed with caution.

  • July date for cash-less in six states intact, says CBN

    The Central Bank of Nigeria (CBN) has said it will not change the July date set for the launch of the cash-less projects in Abuja, Abia, Anambra, Rivers, Ogun and Kano states.

    Speaking to The Nation on Monday, the Director of Communication, CBN, Mr Ugochukwu Okoroafor, said efforts were being made to ensure that the date does not change.

    He said the apex bank is making arrangements to provide the necessary infrastructure for the take-off of the cash-less initiatives in these states.

    He said efforts would be made to ensure that necessary facilities for the programme are deployed soon.

    He said: “On the issue of facilities, CBN will ensure that Point of Sales (PoT) terminals are deployed in the six states before July. This is because we want to ensure smooth running of the project and ensure that the idea is practicable as much as possible. We have no doubt that the initiative would work in those states, the way it happened in Lagos,”

    He said the cash-less programme would be made a national project, after the launch in six states in July.

    “We are expanding the issue of cash-less economy programmes in Nigeria. Very soon, we would go national to reduce the rate at which cash is being used for transactions. We are encouraged by the success recorded in Lagos, and, therefore, decided to add six more states. We hope to achieve success in the six states; thereafter, we would launch across the country,” he added.

    According to him, the CBN so much believes in the practicability of the cash-less programme in the country, and has fashioned out plans to make it work.

    This, he said, informed the decision to phase the implementation of the project.

    CBN had earlier fixed July 1, last year for the launch of the cash-less projects in the six states. But due to some problems, it shifted the date to January 1, and later July this year.

  • N60b credit for agro-dealers coming

    N60b credit for agro-dealers coming

    The Federal Government through the Federal Ministry of Agriculture and Rural Development and the Central Bank of Nigeria (CBN), have launched the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending(NIRSAL) initiative to provide N60 billion credit for agro-dealers at nine per cent interest rate.

    The Permanent secretary, Federal Ministry of Agriculture and Rural Development, Mrs Ibukun Olusote, said this yesterday at the Stakeholders meeting of Southern states on the take-off of the implementation of Growth Enhancement Support (GES) Scheme held at Wallan Hotels, Ibadan.

    She said the loans would allow the small scale input retailers to have access to finance to stock up on seeds and fertilisers across the country.

    She said President Goodluck Jonathan has also approved N15 billion to recapitalise the Bank of Agriculture at less than 10 per cent interest rate for farmers and agribusiness practitioners.

    Mrs. Olusote said the GES scheme is a major milestone in the government’s attempt to modernise agriculture and ensure that Nigerian farmers benefit from subsidised fertiliser, seeds and tractors.

    “As you are all aware indirect targeting of farmers made it easy to divert funds because subsidised seeds, fertilizsers and other equipment are diverted to open market and illegally sold at huge profits. As a result, tens of billions of naira were spent every year to reach farmers with agricultural inputs but the level of utilisation of improved seed and fertilizers remained very low.

    “To ensure that only genuine farmers got the subsidised seeds and fertilisers, we put in place the first ever database of farmers in the history of Nigeria. In 2012, we started with the registration of 4.2 million farmers and will increase this year to five million farmers,” she said, adding that within 120 days of the launch of the GES, over 1.2 million farmers successfully redeemed their seeds and fertilisers, using the electronic wallet system.

    Also speaking, the Oyo State Commissioner of Agriculture and Rural Development, Peter Odetomi, said no fewer than 76,082 farmers were validated out of 78,000 that registered for the GES scheme.

    He said only 16,466 farmers benefited from the system as a result of initial problems encountered on e-wallet operations and delays in supplies of agro-inputs to agro-dealers, urging that the cellulant and the e-wallet consultant for the scheme should appoint adequate staff for each geo-political zone in order to decentralise their operations and have resident offices in the states.

    Odetomi said the state is giving farm settlements a facelift, opening new ones and also planning to rebrand the name to attract the youths to agriculture in a businesslike manner.

  • Banks’ growth will reflect in real sector – CBN

    A Deputy Governor at the Central Bank of Nigeria, Alhaji Suleiman Barau, said the apex bank will ensure that the growth recorded in the banking sector is transmitted to real sector.

    Barau made the pledge in Lagos on Friday while delivering a paper on “Balancing Global and Local Regulatory Requirements” at the 4th Annual Eurofinance Conference in Lagos.

    Barau, who was represented by the Deputy Director, Banking Supervision, Mr. Steve Nwadiuko, said that the CBN planned to use the Basel III programme to impact positively in the real sector.

    The News Agency of Nigeria reports that Basel is an international framework on risk management in banks.

    The CBN adopted Basel II in June 2004, while the apex bank is soon to begin implementation of Basel III.

    According to Barau, Basel III will improve banks’ liquidity and cash adequacy, help Nigerian banks to meet international risk requirements as well as improve their global competitiveness.

    He said that Basel III would lead to the development of many financial products due to higher levels of competition among local and international banks.

    “One of the advantages of Basel III adoption is that it will lead to higher credibility and trust in our banking system.

    “And all these pluses will be to the advantage of our real sector where more cash will be available for its advancement, “ he said.

     

  • CBN to banks: pursue sustainable banking practice

    CBN to banks: pursue sustainable banking practice

    The Central Bank of Nigeria (CBN) has called on banks to pursue and implement issues itemized in the Nigerian Sustainable Banking Practice (NSBP).

    In a circular to the lenders, Special Adviser to the CBN governor, on Sustainable Banking, A’sha Mahmood explained that the policy involves integration of social and environmental considerations into banks’ operations, services, procedures and strategies.

    According to the CBN guidelines on the policy, the environmental and social policies as well as decision-making processes will also be integrated into the operations of discount houses and development finance institutions.

    The sustainable banking practice, according to the statement, aims at minimising or mitigating the negative impacts of financial institutions’ operations on the environment and local communities in which they operate. It also captures the Nigerian sustainable banking principle on agric sector, power sector and the oil and gas sector.

    According to the regulator, for the successful implementation of the principles, the institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.

    “The adoption of the principles will not only help banks in mitigating the E & S risks associated with their business operation and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important.

    “They will also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices. The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles,” it added.

    While noting that the process of developing the sustainable banking principles and guidelines has so far been driven by the banks, the apex bank assured that it will create the enabling environment for banks to succeed in their implementation of the principles.

    The CBN has also recently set new rules for lending to the agricultural sector of the economy. The decision was taken after reports from banks and discount houses indicated that lending to the subsector remains a high-risk, which should be followed with caution.