(Adds analyst comments, background)
By Chijioke Ohuocha
LAGOS, July 5 (Reuters) - Nigeria's central bank will try to
force banks to lend more or face higher cash reserve
requirements, part of a series of measures aimed at reviving an
economy stuck with low growth.
The bank in a circular dated July 3 said lenders who fall
short of a target minimum loan-to-deposit ratio of 60% by
September would have to maintain higher cash reserves.
The bank is seeking to boost credit to businesses and
consumers after a recent recession in Africa's biggest economy
muted lending.
Nigeria's economy has since recovered from that contraction,
but lending has not returned as growth is slow and banks prefer
to pack cash in risk-free government securities rather than lend
to businesses and consumers.
"Failure to meet the above minimum (loan-to-deposit ratio)
... shall result in a levy of additional cash reserve
requirement equal to 50% of the lending shortfall," the bank
said.
The new loan ratio will be subject to quarterly review, the
bank said.
Several Nigerian banks had set ambitious expansion targets
before an oil price collapse mid-2014. Some have decided to
conserve their capital at the expense of higher profits through
lending.
"There is no way we would not see a pick-up in problematic
loans going forward with this circular," one analyst said.
"There is a possibility of repricing of loans ... which would
have an impact on margins."
POLICY FROM THE PAST?
The bad loan ratio has dropped to around 9% from double
digits at the peak of a recession but still above a central bank
target of 5%.
Lenders have failed to expand borrowing in Nigeria, blaming
a weak economy after the oil price crash triggered a recession
and a currency crisis made loans go sour.
Last week, the central bank said it would pursue a
recapitalisation of the banking sector over the next five years
after a series of currency devaluations weakened bank capital.
One banking analyst said the new lending rule risked taking
Nigeria back to the days when the central bank determined credit
allocation, such as in 1984 when President Muhammadu Buhari was
military leader.
Buhari won re-election in February and has pledged to get
the economy growing again. But he has failed to set up a cabinet
four months after winning a second term.
The regulator has also kept cash ratios high to maintain
tight liquidity to curb inflation, attract foreign investors
into bonds and support the currency. A policy has encouraged
banks to lend more to government. Private sector credit growth
has been negative for several years.
Some doubted the new policy would boost lending as banks
would have to ramp up loans to meet the target or cut deposits.
Lenders with smaller deposit bases such as Fidelity Bank
FIDELIT.LG and FCMB FCMB.LG are already compliant, analysts
say while Access Bank ACCESS.LG which bought Diamond Bank this
year, may not much room to grow loans.
Top tier lenders may need to issue new loans of almost one
trillion naira, analysts say, with FBN Holding FBNH.LG and UBA
UBA.LG most affected, analysts say.