“I’m aware that some of the banks obviously will lose some revenue because of the non-remunerated nature of CRR but some of them have been able to compensate for this by using lending rates because if you look at the books, interest margins have actually increased for many of the banks,” Sanusi Lamido Sanusi, governor of Central Bank of Nigeria told CNBC Africa.
The policy created a strict financial regulatory environment for most banks and as expected, many banks initially kicked against it. Nonetheless, a lot of them are adjusting and finding more creative ways to balance the sheets.
“It is weighing the 0.5 or 0.3 per cent impact on bank profitability against the exchange rates and inflation. We have to take decisions,” he said.
The governor, who is set to step down from the post in June 2014, said he has heard the arguments that there are costs but the issue is that, are the costs sufficient to risk a higher inflation rate and are they sufficient to risk a lower inflation rate.
“Remember at the time we did this, the Indian rupee had lost almost 20 per cent of its value. The South African rand had lost 12 [or] 13 per cent of its value. The Ghanaian cedi had lost 12 per cent of its value. The Brazilian real had lost a lot of its money,” he explained.
The implementation of the policy began on the 7th of August this year, which brought dramatic change in an environment that was accustomed to excess liquidity sourced by public funds.
“I think people need to understand that when we take these decisions, it’s not that we are oblivious to the impact on some segments of the economy, it’s that we’ve got to weigh the pros and cons and take a decision,” he concluded.