CBN To Withdraw Public Sector Deposits From Banks

The Central Bank of Nigeria (CBN), yesterday, threatened to withdraw public sector deposits from banks as part of its effort to control money supply in the economy.

The Bank also announced that the federal government overspent by N1.1 trillion in the 2011 fiscal year, saying that weak economic conditions of Nigeria’s major trading partners pose serious threat to the nation’s economic growth.

These were part of the highlights of the new monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2012 to 2013 released by the apex bank yesterday. The policy among other things mandates banks to conduct quarterly stress test, and introduced additional restriction on purchase of foreign exchange for importation of petroleum products.

The Policy said, “Public sector deposits are an important part of the liquidity of the banking system. Accordingly, the CBN shall continue to monitor the movement of deposits of key government parastatals and overheads of core Federal Ministries to ensure compliance with manageable liquidity conditions in the economy. During the programme period, banks may be informed in advance of any need to withdraw or re-inject public sector deposits in the banking system as may be dictated by liquidity conditions.

“The CBN shall sustain the use of macro-prudential regulation and stress testing in assessing the health of banks in 2012/2013. In this regard, banks shall be required to conduct and forward to the CBN, on a quarterly basis, a comprehensive report of their stress test for the period,” the policy said.

The policy placed additional restriction of 48 hours notice on purchase of foreign exchange for importation of petroleum products. It said, “For the purpose of establishing Letters of Credit and Bills for Collection transactions for the Importation of Petroleum products, authorized dealers shall forward to the Director, Trade & Exchange Department, all relevant supporting documents for consideration prior to commencement of the transaction. Furthermore, the CBN shall be notified within 48 hours by the authorized dealers before bidding for funds to pay for the transactions.”