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N420bn is loan to troubled banks – CBN

By  Omoh Gabriel, Business Editor
The Central Bank of Nigeria (CBN), yesterday said “the injection of  N420 billion  into the five affected banks is neither equity nor a bail out by government but a normal central banking function of lender of last resort to the banks,”

In a statement signed by Mr. M.M. Abdullahi of its Corporate Affairs Unit, it stressed, “The money is a loan to the banks to improve their liquidity to enable them meet their obligations and will be paid back to CBN at a premium.

“The CBN Act empowers the CBN to manage money supply in the economy through different mechanisms. The CBN, as Banker to the bankers, has been increasing money supply by lending money to the banks through the Expanded Discount Window (EDW) and the injection of the N420 billion into the five banks is an extension of that function.

“The money is not from the government treasury/federation account and the CBN believes that it does not require any appropriation by the National Assembly as claimed by some analysts.”

The apex bank noted that “the town hall meeting at London was not about selling Nigerian banks but explaining the actions of the Central Bank of Nigeria to the international community, particularly the correspondent banks who advance credit lines to Nigerian banks. ‘The governor and the new managing directors of the affected banks did not discuss selling the banks with any foreign investor or group of investors.

The, governor, however, reiterated that there was no law in Nigeria barring foreign investors from investing in Nigerian banks but the CBN will ensure that only foreign investors genuinely interested in the development of the Nigerian economy will be entertained.

“On the allegation that the governor is introducing Islamic banking as part of the alleged “Northern agenda,” the fact is that Islamic banking/non-interest banking (or whatever it is called) has already been approved by CBN during the tenure of Prof. Chukwuma C. Soludo.”


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