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Home Business News Politics

Here Is How Much Banks Stand to Lose to This New CBN Policy on STF

Nairametrics by Nairametrics
November 10, 2014
in Politics
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1.The CBN had, on November 6, 2014, issued a new guideline to banks and discount houses seeking to access the SDF window. According to the new guideline, any bank or discount house which places above N7.5bn on a day at the discount window will attract zero interest rate on the excess fund.

2. The policy was introduced to encourage banks to lend to the real economy, rather than placing funds at the discount window. The CBN saw the idea of placing funds at the discount as an obstacle to the much needed liquidity required by the real sector.

3. The Head, Investment Research, Afrinvest West Africa Limited, a research and business advisory firm, Mr. Ayodeji Ebo, said the policy might not necessarily translate into a significant increase in lending by banks to the real sector in the near term as the risk that pervaded the space remained evident.

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4. He added, “The Federal Government needs to de-risk the real sector by providing robust infrastructure that reduces overheads and enhance profitability. This will moderate the delinquency rate as the firms (debtor) will be able to generate a return in excess of the cost of funds, hence ensures repayment of borrowed fund.”

5. In nominal terms, the new policy will reduce the amount of funds placed at the discount window to below N200bn relative to N562.2bn as of November 6, 2014, according to Afrinvest research.

6. According to the research, approximately N4.5bn or N36.2bn interest income for banks will be lost for the two months in 2014 and 2015 financial year respectively. It, however, noted that the impact varied among the banks.

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Nairametrics

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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