Corporate Treasurers Examine Implication of CBN 5-Year Policy Thrust

Hamid Ayodeji 

The Association of Corporate Treasurers of Nigeria (ACTN) at the weekend held its breakfast meeting in Lagos, with the theme “The Central Bank of Nigeria (CBN) 5-Year Policy Thrust: Implications for the Corporates”.   

While speaking to members at the meeting supported by FMDQ Securities Exchange, Partner, Financial Services Industry Audit Group, KPMG, Kabir Okunlola, noted that the CBN 5-year policy thrust (2019-2024) aims to: preserve domestic macroeconomic and financial stability; to foster the development of a robust payments system infrastructure that would increase access to finance for all Nigerians; to continue to work with banks to improve access to credit for small holders farmers, MSMEs, and individual consumers; among others.

The target, according to Okunlola, was to achieve double-digit economic growth, single digit inflation rate, and accelerate the rate of employment.

He, however, argued that the CBN loan policy for banks to maintain a minimum Loan-to-Deposit Ratio (LDR) of 65 percent could lead to increase in default rate by bank customers, thereby leading to increase in non-performing loans (NPLs).

He said: “Pushing banks to lend will result to highest level of default with significant impact on the sector.”

Though Okunlola noted that one of the major aims of the loan policy is to increase lending to businesses – corporates and Micro, Small and Medium Enterprises (MSMEs) – especially in targeted sectors (agriculture and manufacturing), he however advised that a potential threat to the policy would be on financial system stability for banks, due to risk of deterioration of asset quality, and higher cost of borrowing which may result from increased non-performing loans (NPLs).