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Nigerian billionaire and Chief Executive Officer of Guaranty Trust Bank Plc, Segun Agbaje, granted an interview to Arise TV earlier today during which he shared his thoughts on the various moves by the Central Bank of Nigeria (CBN) towards ensuring that banks lend more to the real sector of the economy.

The business executive also described as “homegrown innovation” a newly-proposed clause by the apex bank which is aimed at achieving financial stability in the country. According to him, the CBN clause is similar to the credit management system in most advanced countries which serves as an implicit check to prevent those lacking creditworthiness from access to loans.

The CBN Clause: As Agbaje basically explained it, this new CBN clause specifies that someone “cannot borrow in one bank, abandon the loan, and do business in another”.  Prior to this time, someone could actually owe one bank and still easily borrow more money from another bank. This encourages a build-up of non-performing loans, by the way.

[READ: CBN reveals plans to deduct bad loans from bank balances of defaulters in any bank in Nigeria]

Encouraging banks to lend: The new CBN clause is part of a larger plan aimed at encouraging lenders to provide more credit facilities to the real sector of the economy. Recall that in July, the CBN directed that banks must maintain a 60% loan to deposit ratio. When asked to give his thoughts on this, Agbaje said the following:

“It’s funny because I don’t think it’s really that dramatic. The CBN has actually been goo with how they’ve done it. At the time this was announced, the loan to deposit ratio was 57%. All people have to grow by 3%. So, I think there’s a bit more alarm than reality; you’re growing 3% by the end of September and I think for most banks, they should either get very close or there some banks that are over it. I think it’s been measured. If we had gone from 57% to 80%, then we would have had a lot of chaos.”

Possible Lawsuits? When asked if the CBN clause could elicit some lawsuits from aggrieved bank customers who feel they have the right to do business with whomever, Agbaje said it’s possible. However, since all the banks are together on this, this set of possible customers may have a difficult time making their case. He also added that sincere borrowers should not have any issues with this move.

You can watch the entire interview by following the link below.

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