30 January 2013

Nigeria: CBN Moves to Save Banks From Euro Crisis

In a bold step aimed at ensuring that Nigerian banks are not exposed to the on-going economic crisis in the euro zone, the Central Bank of Nigeria (CBN) Tuesday directed commercial banks to furnish it with details of the European Investment Bank's (EIB's) investments in their institutions.

Deputy Governor, Operations, CBN, Mr. Tunde Lemo, disclosed this in an exclusive chat with THISDAY.

He pointed out that with the development in the euro zone, the EIB might decide to recall some of its funds in Nigeria.

Lemo, who said while shedding more light on a circular titled: "Re: European Investment Bank's Investments in Nigerian Banks," posted on the apex bank's website yesterday, explained: "I believe that given what is happening in the euro zone, it is unlikely that the EIB may start to call back shortly.

"We are just trying to dimension the impact of that exposure to Nigerian banks in the event of a call back. It is not more than a pre-emptive measure."

The central bank's circular, signed by Mr. N.T. Igba on behalf of the Director, Trade and Exchange Department, threatened to sanction banks that fail to comply.

Some of the information requested from the banks include: the amount of EIBs investment in dollar (or dollar equivalent), date of investments, tenor, nature of investment, repatriation from date, outstanding and their remark(s) on the transaction.

It added: "You are hereby requested to submit returns on the above subject to the Central Bank of Nigeria. The report which should be in the attached format should reach the Director, Trade and Exchange Department, Abuja, not later than 12 noon on Tuesday, January 29, 2013.

"Please ensure compliance with the format and time-line to avoid sanctions which may include suspension from the foreign exchange market."

The World Bank about a fortnight ago advised Nigeria and other developing countries that the global economy was still weak.

The Bretton Woods institution had also urged developing economies to continue to strengthen buffers in order to deal with risks from the euro zone as well as fiscal policy in the United States.

It had also pointed out that four years after the onset of the global financial crisis, the world economy had remained fragile, saying that growth in high-income countries was still weak.

President, World Bank Group, Jim Yong Kim, "The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth.

"Developing countries have remained remarkably resilient thus far. But we can't wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the stage for the stronger growth that we know that they can achieve in the future."

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