Africa

Nigeria is a step closer to setting up an Asset Management Company, after ten banks were rescued last year with bad debts of about $6.7bn. The Senate will now produce a version of the bill, before the two houses form a common document. The ten banks will have to pay back their loans through the new company. The bill’s passage has been swift: the proposal only became official in January.

Imagine walking down the high street, cash in hand, to place your savings into your local deposit bank. Now imagine going to a different bank to check on your loan balance. And a third bank to find out about insurance. Each bank only offers a specific service: they are local and they do not compete with each other.

Such a set-up would redefine the concept ‘bank’. 

Nigeria’s central bank has kept its benchmark interest rate at 6 per cent, but cut its deposit rate from 2 to 1 per cent, reports Reuters. The press release will be available here. Sub-Saharan Africa’s biggest energy producer wants to stimulate lending: “We will reduce the level of interest the banks earn with us to encourage them to seek other areas, which means lending,” central bank governor Lamido Sanusi is quoted as saying.

Neighbours Namibia and Botswana have kept their main rates on hold today. Namibia has kept its repurchase rate at 7 per cent for the fourth consecutive month, while Botswana has kept its main lending rate at 10 per cent. Namibia and Botswana neighbour South Africa, the continent’s largest economy, and Namibia generally follows South African monetary policy. South Africa kept its rate at 7 per cent for the fourth month, on January 26.

Inflation in all three countries is at similar levels, albeit in different directions. South African inflation ran at 6.2 per cent in January, above the 3-6 per cent range for the second month, but falling toward it from December’s level of 6.3 per cent. Inflation in Namibia – also above target but slowing – is currently about 6.3 per cent. Botswana has just exceeded its target range of 3-6 per cent, with inflation rising to 6.1 per cent in January. 

The Bank of Ghana has cut the main policy rate from 18 to 16 per cent, hoping banks will reduce their rates too, helping to restore credit growth to the economy.

The bank is keen to push falling inflation down further. Annual inflation stood at 18 per cent in October, falling each month to 16.9, 15.9 and 14.8 per cent in January. The target range is 7.5 – 11.5 per cent. 

South Africa’s finance minister has announced a significant shift in central bank policy in a radio interview. His comments will raise more questions about the bank’s independence.

The South African Reserve Bank will adopt a flexible approach to inflation. The bank will be allowed ‘temporary deviations’ from its target of 3 – 6 per cent in the pursuit of growth, reports Business Week.”[Inflation will not be] the sole focus of what the bank does,” said Finance Minister Pravin Gordhan. “We’re very mindful of growth.” 

Libya’s central bank plans to issue two licences for foreign banks to set up units in the country. Foreign banks will have full management control of the new lenders and a 49 per cent stake, the Tripoli-based central bank told Bloomberg today. The remaining 51 per cent will be held by domestic investors. The banks, which must have international presence and a healthy credit rating, must express their interest by March 30.

Imagine Ben Bernanke facing exile to Mexico for standing firm against the banks.

That is what faces Nigeria’s central banker, Lamido Sanusi: “I was not under any illusion of the power of the people I was going to fight,” he says. “I’m ready to go on exile, but we can delay the day. We must continue to fight in order protect the depositors.” 

The Ghanaian central bank has all but declared war on the high interest rates charged by banks to consumers, and is threatening measures such as interest rate caps to bring them down.

Although the central bank’s base rate is 18 per cent – down 50bp in November – the country’s banks are charging average rates of about 30 per cent. The central bank has criticised the stickiness of the interest rates – banks are quick to raise them but slow to let them fall.

Nigeria’s central bank is honing plans to categorise banks by region or speciality. The idea, discussed in January, would reject the current banking model in which all banks are all things to all people.