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Banks urge govts to redeem N1tr loans
By Esan Sunday
Snr
Finance
Correspondent,
Lagos
Banks, still smarting
from the N8 billion public sector fund withdrawn from their vaults and the
panic withdrawals by customers, have asked the Central Bank of Nigeria (CBN) to
prevail on the three tiers of government and their agencies to pay loans they
owe them.
This is to enable them
cushion the effect of the withdrawal of public sector funds from the system.
Their argument is that
money is the ware of the banking system and they would need all that is theirs
legitimately to be able to do business and prepare themselves for the new N25
billion capital requirement prescribed by the CBN.
Conservatively, the
amount the governments and their agencies owe the banks is about N1trillion.
The banking community,
under the auspices of the Chartered Institute of Bankers of Nigeria (CIBN), has
told CBN Governor Charles Soludo that while they are not against the phased
withdrawal of the funds, the Federal Government, being the largest borrower
from the sector, should also pay its debts to avoid liquidity problems.
The banks asserted
that despite their deposit constraints, the government remains their largest
borrower, crowding out the private sector.
In turn, banks have
continued to reduce their exposure to the Federal Government as the facility
extended to it as of April declined by N17.7 billion or 3.9 per cent. It
declined by N5.2 billion in May.
Sources said bankers
have decided to mount pressure on the CBN over the repayment of government
debt.
The apex bank has
pledged to press on with its determination to withdraw the public sector funds,
as the funds, a little above N100 billion, would be withdrawn gradually to
regulate liquidity in the economy.
It insisted that it
would continue to withdraw the funds until excess liquidity reduces.
Last week, the CBN
said it had only withdrawn N8 billion and that it has given government agencies
till the end of this week to deposit into its coffers funds they withdrew from
the banks.
The CBN showed in its
2003 annual report that Abuja alone owes banks N552.6 billion, representing an
increase of 47.9 per cent above the level in December 2002.
Claims on state and councils declined in the first half of
2003, but bank credit to them increased in the latter part of the year by 16.8
per cent, in contrast to a decline of 35.3 per cent in 2002.
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