In order to reduce demand for foreign exchange, especially the dollar, the Central Bank of Nigeria has engaged in continuous and aggressive mop up of cash from the economy in the past six months.
According to Punch, the development is responsible for the cash crunch that has hit the economy with a heavy toll on consumers (households), companies and commercial banks, especially mid-size lenders in the country.
The CBN has mopped up trillions of naira in the past six months, according to top bankers who spoke on condition of anonymity.
The development has made the lending rate to soar, especially among the Tier-1 banks, which are able to do little lending at the moment.
While mid-sized banks are struggling to maintain their liquidity positions due to the shortage of naira, the situation is making it increasingly difficult for companies to access credit to expand their operations.
“The loan book of banks is growing leaner and leaner because of the tight liquidity situation the CBN’s actions have put the banks,” a top executive of a commercial bank, who spoke on condition of anonymity, said.
Aside from the regular mop up of liquidity through the regular primary and secondary markets’ action of the TBs, the CBN was said to be mopping up huge amounts of cash from the banking system through a special Open Market Operation.
Did you find this article informative? Kindly like, comment and share!
