Nigeria to limit bank deposits with central bank to boost lending

LAGOS: Nigeria plans to limit daily bank placements with the central bank and the interest paid on them, in an effort to boost credit in Africa's biggest economy.

The central bank said in a circular dated July 10 that daily placements with it by lenders above 2 billion naira ($6.5 million) would not earn interest.

The latest rule, which takes effect from Thursday, is the second in a week targeted at increasing credit to businesses and consumers. The central bank is seeking to boost loans by trying to force banks to lend after a recent recession.

Nigeria's economy has since recovered from that contraction, but lending has not returned as growth is slow and banks prefer to invest in risk-free government securities or pack cash with the central bank for a fee rather than lend.

Last week the central bank asked 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.