The Nigerian banking system have been projected to collapse in the near future if the present hash operating environment characterized by high Cash Reserve Ratio, TSA and liquidity draining from treasury bills are unrestrained.
Raising the alarm Thursday in Lagos, the Chief executive Officer, Cowry Assets Limited, Mr. Johnson Chukwu, one of the panel of discussants at the Securities and Exchange Commission (SEC) seminar in Lagos Thursday on way forward for implementation of the 2017 budget, said that the Nigerian banking system is endangered,
Chukwu said that the government through policy direction has succeeded to suffocate the Nigerian banking system, ostensibly reputed for driving the overall economy as well as the Nigerian capital market, adding that spending 70 per cent of the 2017 budget on recurrent, is not encouraging.
He said that the high lending rate occasioned by government policy towards checking inflation, should be jettisoned for a policy that targets growth which also should be driven by a regime of low lending rates.
He said that the 2017 federal government is fashioned towards debt servicing and recurrent expenditure, and not targeted at strengthening the economy taking into consideration that the country currently suffers from low productive sector.
The Cowry assets boss urged the federal government to deploy unconventional systems to check market depression like other economies such as the USA, UK and even South Africa, stressing that the Nigerian banking system has been at the receiving end of government policies, which has continued to impact negative in other sectors as well as the Small and Medium scale enterprises, drivers of the micro economic sector.
He maintained that the same government which has stifled the financial systems with high cash reserve ratio (CRR), Treasury Single Account, starves banks of funds which could have been ploughed back into the system through the banks.
He pointed that hence the pension funds and the NAICOM are the highest investors in the Nigerian market, only eight per cent of their funds are invested in the capital market, while 58 per cent of the same pension funds are invested in federal government bonds.
In addition to measures government has mapped out to starve the system of funds, the Cowry Assets boss , said that on regular basis , the FG continue to float Treasury Bills, and money which could have gone to the banking sector or the capital market is continually taken by the government through the T-Bills where there is sure returns on investment.
The government, he said should deploy developmental initiatives in its 2017 budget implementation which should impact positively on the common people and SMEs through reduced lending rates which could only be achieved when there is enough liquidity in the banking systems.
“There should be drop in CRR if you want liquidity in the system, if we continue with the current monetary policy, the banking system will collapse” Chukwu said.
The financial analyst and investment banker said that through the 2017 budget, the FG positions self as developer of infrastructures, which could have been left to the private sector under a conducive operating environment.
Chukwu stressed that confidence in the Nigerian economy and market by issuers and investors is usually driven by policy direction and a plan with definite deliverables and timeline attached to it.