Reps back withdrawal of public sector funds from banks

The House of Representatives has defended the
withdrawal of public sector funds from
commercial banks by the Central Bank of
Nigeria (CBN)
The House Committee on Banking and
Currency, noted that it has been vindicated on
the issue that has been its major concern since
its inauguration two years ago.
Its Chairman, Jones Chukwudi Onyereri, said
the argument in support of the withdrawal of
public sector funds from commercial banks,
was for the banks to focus on their core
banking functions.
In a statement yesterday, Onyereri explained
that the withdrawal of the funds will force
banks to look for alternative sources of funds,
which will in turn lead to offering of better
incentives to the public, including higher
deposit rates and an increase in private sector
lending.
“The Committee therefore sees the recent
policy decision by CBN to increase the Cash
Reserve Ratio (CRR) for public sector deposit in
banks to 50 per cent as a step in the right
direction.
“Though it is the Committee’s goal to see to a
total withdrawal of public sector funds from
the commercial banks, the Committee applauds
the CBN for taking this important step, and for
seeing the benefit in the Committee’s stance on
this matter and the obvious added value such
action will bring to the private sector.
He said the Committee believes that in the long
term, the action will bring the much-needed
respite to the consumers from high bank
charges, lack of banking incentives and high
interest rates.
“The over reliance of our commercial banks on
public sector funds has led to a total neglect
of the private sector by the banks, as they see
the public sector fund as a cash cow, which
has resulted in a decline in their
entrepreneurial drive,” he said.
He said the Committee was ready to continue
to work with the CBN and other financial
bodies to improve lending to the private sector
at reduced rates.