MPC to increase MPR to strengthen the banking system. The Monetary Policy Committee (MPC) members of the Central Bank of Nigeria (CBN) have expressed concerns about the banking system’s vulnerabilities, which may cause the CBN to start easing up on the speed at which the Monetary Policy Rate (MPR) is raised.
This was one of the opinions included in the communique from the July 2023 MPC meeting, whose members’ statements were published yesterday.
Adamu Edward, Deputy Governor of the CBN’s Corporate Services Directorate, expressed the following opinion: “It is encouraging that the banking sector continues to be robust.
“However, it might be too soon to determine how recent changes to the industry’s financial soundness indicators (FSIs) would affect things. Maintaining system stability continues to be a top concern, both on its own and for the efficient transmission of monetary policy signals.
Also read>>> Nigeria’s telecom industry now accounts for 16% of GDP, according to Danbatta
Danbatta walked the audience of eager telecom executives and other industry stakeholders through the enormous strides being made by the Commission as he spoke on the topic of “Success Factors and Barriers to National Broadband and Digital Economy Aspirations.”
Danbatta, the EVC of NCC, stated that quarterly GDP has greatly increased to achieve its present level of 16% and that this has continued to favorably impact all parts of the economy from an approximate 8% contribution to GDP in 2015 when he joined the organization.
The industry has expanded rapidly over the past 20 years because to the Commission’s consistent regulatory perfection and operational efficiency, which has had a positive impact on all other economic sectors. Our primary competitive advantage as an industry has been the efficient regulatory framework implemented by the NCC with the backing of all stakeholders, according to Danbatta.
“I believe that the recent wave of banking system issues in the United States and Europe serve as a crucial teaching moment, showing us that the soundness of our domestic banking system should never be taken for granted.
“Some of the measures are already raising red flags, such as the capital adequacy ratio (CAR), which has slowly decreased from 14.11 percent a year ago to 11.23 percent despite being inside the regulatory threshold. Even while the problem isn’t presently life-threatening, ignoring it might not be the best course of action in the medium to long term.
“Slowing the pace of upward interest rate adjustments clouds cushion any underlying vulnerability in the banking system.”
Prof. Adenikinju Adesola, a participant, spoke for himself and noted that between May and June 2023, the ratio of operating costs to total operating income decreased from 70.7 percent to 62.1 percent.
“The high operating cost environment of the banking sector should be concerning and needs to be addressed,” I emphasized in my previous Personal Statement.In other regions, the ratio is 23.5% in Kenya, 45.2% in Ghana, 50.6% in Turkey, 41.0% in Brazil, 62.0% in Malaysia, 43.2% in South Africa, and 35.2% in Angola.
“The Bank Management should make use of the entire arsenal of tools at its disposal to address the liquidity surplus, including Open Market Operations, other indirect measures that provide adequate returns to money market instruments and mop up excess liquidity, as well as attract foreign portfolio investment that would increase liquidity in the FX market.
Private enterprises should be encouraged to issue commercial papers so that investors have access different investment tools.
Mrs. Aishah Ahmad, the CBN’s Deputy Governor for the Financial System Stability Directorate, stated: “The Banking system maintains its resilience and capacity to sustain the economy through the headwinds. Emerging vulnerabilities, however, need to be controlled.
Although non-performing loans and other prudential ratios are within statutory bounds and credit to the economy is still expanding, the Bank must be on the lookout for vulnerabilities brought on by the elimination of subsidies and other macroeconomic shocks.
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