The Central Bank of Nigeria has fined 12 commercial banks, including the local subsidiary of US Citigroup, a total of 500 billion Naira ($1.4 billion), for failing to increase loans to meet a regulatory target.
According to the central bank, the banks failed to comply with the minimum loan-to-deposit ratio of 60% set at the beginning of Q3 2019. Citibank Nigeria was fined 100.7 billion Naira ($278.5 million), the Bank’s list shows.
Other banks affected include top tier Nigerian lenders Zenith Bank, Guaranty Trust Bank, First Bank and United Bank for Africa.
The cash reserve requirement in Nigeria is 22.5%. However, the regulator has said that banks, which fail to meet its new minimum loan requirement, will face a higher cash reserve equal to 50% of the lending shortfall.
The decision was taken “to ramp up growth of the Nigerian economy through investment in the real sector,” Ahmad Abdullahi, director of banking supervision, said in the letter to banks. “To encourage lending to small businesses and consumers and more mortgages, these sectors shall be assigned a weight of 150%” when computing the loan-to-deposits ratio.
The Central Bank has not yet indicated how the sanction will be paid but it levies charges on the banks’ cash reserves, which could affect the level of equity capital of their shareholders.
Nigeria’s economy is expected to pick up in 2019 with gross domestic product expanding close to 3%, up from 1.9% last year, according to the central bank.