The head of Nigeria’s biggest lender has called on the central bank to ease regulations he said are hurting profits and causing some foreign investors to shun Africa’s largest economy.

A rule forcing banks to place 31 percent of deposits with the regulator needs to changed, said Bisi Onasanya, chief executive officer of First Bank of Nigeria Ltd. The requirement should be lowered or the central bank should pay interest on the funds, he said.

“The existing cash reserve regime is not helpful,” Onasanya said Thursday in an interview during a Bloomberg conference at the Nigerian Stock Exchange in Lagos.

First Bank has close to 650 billion naira ($3.3 billion) sterilized at the central bank at zero percent interest. These are funds we pay interest on. So you can imagine the impact this has on our revenue-generating capabilities and our ability to fund loan obligations.

The central bank of Africa’s largest oil producer has increased reserve requirements as part of measures to bolster the naira, which fell 18 percent against the dollar in the past year as crude prices slumped. Ratcheting up the ratio reduces the amount of naira in circulation, helping to bolster its value.

If the central bank must keep that level, which I feel is very high, it should be complemented with some cushioning effects, Onasanya said.

The central bank should consider remunerating, even at the average cost of funds, for banks to be able to meet their funding costs.




http://vibes247.com/deposit-rules-hurting-profit-first-bank-ceo/

cc: ycomics

The first bank chief has a good point . But on the other hand ,what does cbn hope to achieve by keeping these funds ?