Nigeria fines 12 banks $1.3 billion for failing to meet loan target

Nigeria’s central bank has levied a charge on 12 banks for a total of more than 400 billion naira ($1.3 billion) for failing to increase loans to meet a regulatory target, three banking sources and one of the lenders told Reuters on Thursday.

The central bank asked lenders in July to maintain a ratio of lending out at least 60% of deposits by September or face a higher cash reserve levy, part of measures aimed at getting credit flowing in Africa’s biggest economy.

The cash reserve requirement in Nigeria is 22.5%. However, the regulator has said that banks which fail to meet its new minimum loan requirement will face a higher cash reserve equal to 50% of the lending shortfall.

Central bank spokesman Isaac Okoroafor confirmed the levy on Thursday and said: “The funds will go into (the cash reserve requirement) and will not be available to (banks).”

The central bank has been seeking to boost credit to businesses and consumers after a recent recession in Nigeria, but lending has yet to pick up. With growth slow, banks prefer to park cash in risk-free government securities rather than lend to companies and consumers.

Economic growth

Nigeria’s economy is expected to pick up in 2019 with gross domestic product expanding close to 3%, up from 1.9% last year, according to the central bank.

Since the recession, lenders have done little to expand credit in Nigeria, blaming a weak economy after a 2014 oil price crash and a currency crisis that made loans go sour. Analysts fear growing credit quickly could weaken asset quality and capital buffers.

The central bank has said loans rose 5.3% in the three months to the end of September, to 16.40 trillion naira, due to the new minimum requirement, and increased the lending ratio target in what it said was a move to sustain the momentum.

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