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Nigeria: CBN to Investigate Banks Over Interest Rate Hike
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Daily Trust (Abuja)
24 July 2008
Posted to the web 24 July 2008
Idris Ahmed
The Central Bank of Nigeria (CBN) will soon commence investigations into the interest rate hike by commercial banks in the country, the CBN Governor, Professor Chukwuma Soludo, said in Abuja yesterday.
Briefing newsmen after the CBN's Financial System Surveillance Committee (FSSC) meeting, he said the current deposit rates were not justifiable and necessitated investigation.
According to the CBN economic report for April, lending rate was 18.72 percent.
Soludo attributed the hike to banks' desperate effort to meet the CBN's uniform accounting year-end on December 31.
The apex bank chief said it is postponing the uniform accounting year-end in the banking industry from December 2008 to December 2009.
He said: "This is in response to the observed desperate behaviour of some banks in deposit mobilization and hiking interest rates at levels that cannot be justified by fundamentals.
"The core (non-food) inflation rate is currently at about 3.6 percent and both the deposit and lending rates that currently prevail in the market are not justifiable. The CBN will investigate these practices by some banks," he said.
According to him, there is nothing CBN can do about the current inflation rate which has reach about 12 percent because "it is induced by rise in food prices."
The governor also said that from January 2009, it will introduce resident examiners in all banks to "strengthen CBN's effectiveness in the Risk Based supervision."
This, he said, will be done by posting CBN staff to each of the banks who will monitor and supervise the activities of the banks on daily basis and report to head office.
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Speaking on licenses to more banks, the Governor said that the process is ongoing, saying that any investor that meets the conditions will be issued with a banking license.
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