The Central Bank Punishing Lenders That Won’t Lend

Nigeria’s central bank introduced measures last year to encourage commercial banks to lend more, part of a bid to revive one of Africa’s biggest economies. Credit growth, however, has stagnated, despite the new rules enabling lenders to deploy funds previously earmarked as reserves. Now, central bank Governor Godwin Emefiele is taking a more aggressive approach, penalizing banks that are deemed too risk-averse.

Nigeria’s economy contracted for the time in 25 years in 2016 -- sparked by the crash in oil prices in 2014 -- and has struggled to pick up since. (From 2000-2014, economic growth had averaged 7.7% per annum.) By increasing access to credit, the central bank is aiming to bolster investments in agriculture and manufacturing, diversify the oil-dependent economy and create jobs. Unemployment surged to 23.1% last year, up from just 6.4% in 2014.