CIBN Highlights Challenges in Banking Sector Due to Recent Economic Policies

The Chartered Institute of Bankers of Nigeria (CIBN) has observed that recent government policies, notably the removal of fuel subsidies and the floating of the Naira, have adversely affected the banking sector and the broader Nigerian economy. These insights were shared during CIBN’s 2024 end-of-year event in Umuahia, Abia State.

Adiele Kelechi, Chairman of the Organising Committee, highlighted that the banking sector faced significant challenges in 2024, including extensive information technology migrations. He noted that the elimination of fuel subsidies and the Naira’s floatation contributed to heightened inflation and an increase in the Monetary Policy Rate (MPR).

Despite these challenges, CIBN members acknowledged that bankers have been at the forefront of navigating economic difficulties. They also noted that the Nigerian economy is beginning to experience the anticipated stability resulting from the Federal Government’s economic policies.

Isaac Okoroafor, a former Director of Communications at the Central Bank of Nigeria (CBN), who was honored for his contributions to Nigeria’s economy and the Institute, emphasized the pivotal role of bankers in maintaining economic stability.

In his keynote address, Professor Udochukwu Ogbonna, Chairman of the Abia State Board of Internal Revenue, advised the CBN to reduce the Cash Reserve Ratio (CRR) to enable banks to extend more loans to customers. He pointed out that Nigeria’s current CRR stands at 45%, which is among the highest globally. Ogbonna recommended that Deposit Money Banks conduct thorough credit analyses before extending credit to customers.

It’s noteworthy that the CBN increased the CRR for deposit money banks from 45% to 50% in October 2024. This adjustment requires banks to hold a significant portion of their deposits as reserves, potentially limiting the funds available for lending.

The removal of fuel subsidies and the unification of various official foreign exchange windows have been part of broader economic reforms implemented by the Nigerian government. While these measures aim to stabilize the economy in the long term, they have introduced short-term challenges, including increased inflation and operational difficulties for banks.

In light of these developments, stakeholders continue to deliberate on strategies to mitigate the adverse effects of these policies and promote economic stability.

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