By Dipo Olowookere

Says Investors Mopping up Forex Over Devaluation Fears

CBN’s 65% LDR Policy for Banks Punitive

One of the most respected bankers in Nigeria and former Group Chairman of Stanbic IBTC, Mr Atedo Peterside, has faulted the decision of the Central Bank of Nigeria (CBN) led by Mr Godwin Emefiele, to increase the loan-to-deposit ratio (LDR) for deposit money banks (DMBs) in the country.

In mid-2019, the apex bank directed commercial banks in the country to ensure 60 percent of their total deposits were given out to customers as loan, warning that failure to comply by September 30, 2019 would attract fine.

After the deadline, some lenders were sanctioned by the CBN and the LDR further raised to 65 percent with a new deadline of December 31, 2019 fixed for full compliance.

The central bank had explained that this policy was to “sustain the momentum,” noting that the ratio would be subject to quarterly review, in order to encourage SMEs, retail, mortgage, and consumer lending.
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But Mr Peterside described this policy as punitive to banks because of the present economic situation in the country and the world in general as a result of the coronavirus also known as COVID-19, which has paralysed business activities across the globe.

The business mogul, speaking when he was conferred with honorary fellowship in Lagos at the weekend by the Chartered Institute of Stockbrokers, said the present inflation rate, at 12.13 percent in January 2020, coupled with low yield in the fixed income market, would make it difficult to attract investors.

He said to make the investment environment conducive, re-build investor confidence and help stockbrokers to overcome market burn out, the CBN must work hard to bring inflation down to about five percent.

“The Central Bank of Nigeria has increased the loan to deposit ratio, which requires banks to make loan or stop collecting deposit.
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“With the current low interest rate, the policy is punitive. The CBN should bring inflation down to five percent to stabilise the economy,” Mr Peterside said during the induction of 62 newly qualified stockbrokers into associate members.

He absolved stockbrokers of the blame for persistent selling pressure with diminution of share values on the Nigerian Stock Exchange, saying their hands are tight.

“The problem of the capital market is not the fault of stockbrokers but that of macroeconomic stability framework. In Nigeria, the inflation rate is currently 12 percent compared with two percent in the United States of America,” he declared.

According to him, the present situation in country may lead to the eventual devaluation of the Naira. He said The inflation rate in Nigeria provides incentives for devaluation of the Naira and many investors fear devaluation.

The fear of devaluation of the Naira in the wake of 12 percent inflation rate with potential for further increase had elicited flight for safety, as local and foreign investors were taking short term bet on foreign currency as a hedging strategy, he noted.
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“The fear of devaluation in itself is pushing many investors towards buying foreign currency as a short-term bet to speculate exchange rate,” he said.

However, he emphasised that macroeconomic stability, especially low inflation rate regime, remains a major as tool both fiscal and monetary authorities can use to attract all types of investors into the Nigerian capital market.

President of CIS, Mr Adedapo Adekoje, while speaking at the ceremony, explained that Mr Peterside was honoured by the institute’s board in recognition of his intellectual and professional contributions to the growth and development of the capital market and economy as a whole.

https://businesspost.ng/economy/bring-inflation-down-to-5-to-stabilise-economy-peterside-tells-cbn/

From one problem to another,when you think that things will be a little better,bad news will surely pop up to frustrate your tiny hope and hapiness
Yeye government

How?

I do support Mr Peterside for his opinion on economy. This week, 3 top nations in the world, Australia, United States, New Zealand cut their interest rate by the Chairmans Central banks, that's what done out of the fear for their nation, as Coronavirus outbreak impending. They did this to help the economy of the country
I do see side Mr Peterside, Mr Emefiele should consider this with the support of Mr President by cutting the interest rate to help the country's economy. A serious Government who cares about his citizens overall Well being, should really consider the options. You can get high definition movies and series into external drive and pc including Jumanji: the next level, Bombshell, Charlie's Angel, Knives out, Frozen II Doctor Sleep, Jojo Rabbit, Parasite, and varieties of Series.
(zero, eight, one, four, four, two, three, eight, three, two, seven)

Ok

DeomoviesI:
I do support Mr Peterside for his opinion on economy. This week, 3 top nations in the world, Australia, United States, New Zealand cut their interest rate by the Chairmans Central banks, that's what done out of the fear for their nation, as Coronavirus outbreak impending. They did this to help the economy of the country
I do see side Mr Peterside, Mr Emefiele should consider this with the support of Mr President by cutting the interest rate to help the country's economy. A serious Government who cares about his citizens overall Well being, should really consider the options. You can get high definition movies and series into external drive and pc including Jumanji: the next level, Bombshell, Charlie's Angel, Knives out, Frozen II Doctor Sleep, Jojo Rabbit, Parasite, and varieties of Series.
(zero, eight, one, four, four, two, three, eight, three, two, seven)

Australia (RBA) & New Zealand (RBNZ) actually kept rates on hold. Only the US (Fed) cut rates yesterday.

the major problem with Nigeria is our poorly managed ease of doing business metrics... one of the major factor of ease of doing business is power, road/rail , National Identity Database, Strigent border management and the most important one which is ability to quickly get a land and register its bank and government acceptable C of O

The funds are available in all banks and the CBN, infact Nigerian banks are one of the few in the world with so much redundant money staying idle, Nigerians have many would be entrepreneurs who have well researched feasibility study and a bankable business plan but unfortunately unlike their American and Chinese counterparts they don't have access to credit because most Nigerians Startups cant meetup Loan secuiriy and collateral needs

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Bring it down as if it was CBN or Emefiele that put the current figure.

Inflation rate responds to the general performance of the economy and not some figures you write and rewrite.

Is this how Peterside would have governed Rivers?

Awol1:
Bring it down as if it was CBN or Emefiele that put the current figure.

Inflation rate responds to the general performance of the economy and not some figures you write and rewrite.

Is this how Peterside would have governed Rivers?

this isn't the same Peterside of Nimasa this one is Peter and not Dakuku and I agree with his point, only CBN through loans (low intrest) and government policy can boost production index, increase GDP and reduce inflation.. the only reason we have inflation on some certain goods is that we don't produce them locally, and the ones we produce locally investors get credit facility at ridiculously high interest rates.. even common traders get loan from micro finance loan sharks at an alarming interest rate there by cause price hike and inflation

.

On one hand, Peterside castigate low interest rate, project devaluation of naira while canvassing for lowering inflation to less than 5%. How do you achieve lowering inflation when you have a threat of devaluation?

While I agree with Peterside on lowering inflation. I disagree with a lot of Nigerians such as Peterside who only see the problem. what's stopping him from taking it further and proffering solution on how to achieve the objective of low inflation?

courage89:
On one hand, Peterside castigate low interest rate, project devaluation of naira while canvassing for lowering inflation to less than 5%. How do you achieve lowering inflation when you have a threat of devaluation?

While I agree with Peterside on lowering inflation. I disagree with a lot of Nigerians such as Peterside who only see the problem. what's stopping him from taking it further and proffering solution on how to achieve the objective of low inflation?

He's talking to the CBN not you. The CBN knows what to do

Mr Peterside is saying that CBN's decision to force banks to lend instead of retaining cash is bad for the economy. I can understand where he is coming from. He is a banker as he has a stake in Stanbic Bank.
But if banks don't lend to the SMEs how will the economy grow?

If the banks dont lend, how would inflation drop..

Impenia:
Australia (RBA) & New Zealand (RBNZ) actually kept rates on hold. Only the US (Fed) cut rates yesterday.

Please check again for March 3rd RBA announcement