The head of Nigeria’s biggest lender has called on the central bank to ease regulations he said are hurting profits and causing some foreign investors to shun Africa’s largest economy.
A rule forcing banks to place 31 percent of deposits with the regulator needs to changed, said Bisi Onasanya, chief executive officer of First Bank of Nigeria Ltd. The requirement should be lowered or the central bank should pay interest on the funds, he said.
“The existing cash reserve regime is not helpful,” Onasanya said Thursday in an interview during a Bloomberg conference at the Nigerian Stock Exchange in Lagos. “First Bank has close to 650 billion naira ($3.3 billion) sterilized at the central bank at zero percent interest. These are funds we pay interest on. So you can imagine the impact this has on our revenue-generating capabilities and our ability to fund loan obligations.”
The central bank of Africa’s largest oil producer has increased reserve requirements as part of measures to bolster the naira, which fell 18 percent against the dollar in the past year as crude prices slumped. Ratcheting up the ratio reduces the amount of naira in circulation, helping to bolster its value.
“If the central bank must keep that level, which I feel is very high, it should be complemented with some cushioning effects,” Onasanya said. “The central bank should consider remunerating, even at the average cost of funds, for banks to be able to meet their funding costs.”
Ibrahim Mu’azu, an Abuja-based spokesman for the central bank, didn’t answer a call to his mobile or immediately respond to an e-mail requesting comment.
International investors are shying away from Nigerian stocks partly because of the regulations, Onasanya said.
“You can see portfolio investors now taking a wait-and-see attitude,” he said. “Some are even selling, because nobody wants to invest in an emerging market if the returns are not very good.”
FBN Holdings Plc, First Bank’s parent, had $22.6 billion of assets at the end of March, more than any other lender in the country. Its shares fell 0.1 percent to 7.97 naira at 12:28 p.m. in Lagos. They’re down 44 percent in the last 12 months, compared with a 15 percent drop for the Nigerian banks index.