N420bn bailout not from govt treasury - CBN

THE Central Bank of Nigeria (CBN) has said the N420 billion bailout released for the five troubled banks was not taken from the government treasury.

The clarification, according to the apex bank, became necessary due to the consistent bashing it had continued to receive, following its action to save the banks.

The CBN, in a press statement entitled Further Clarification of CBN Intervention in Five Deposit Money Banks, said it was concerned with comments on the legality or otherwise of the injection of N420 billion into the troubled banks.

According to the apex bank, its core mandate, among others, were monetary policy formulation and implementation and the promotion of a sound financial system, stressing that it was in pursuance of these objectives that it provided liquidity support to the five banks.

“The injection of N420 billion into the five affected banks is neither equity nor a bailout by government but the normal and statutory central banking function of lender of last resort to deposit money banks facing acute liquidity problems.

“The loan is an accommodation facility intended to improve the liquidity position of the banks to enable them to meet their obligations and will be repaid,” the statement read.

It said the CBN Act empowered the apex bank to manage money supplied in the economy through different mechanisms, adding that the CBN, as banker to other banks, had been increasing money supply by lending money to the banks through the Expanded Discount Window (EDW) and the injection of the N420 billion was similar to that function.

“The money is not from the government treasury and the CBN does not require any appropriation by the National Assembly in order to perform this function which, in any event, is not often foreseeable,” the statement added.

By: Gbola Subair,