The Chairman, Abia State Board of Internal Revenue Services, Professor Udochukwu Ogbonna has called on the Central Bank of Nigeria to reduce the cash reserve ratio to enable deposit money banks to extend loans to their potential customers, in order to enhance the performance of banks and at the same time stimulate the economy.
Professor Ogbonna made the call in Umuahia while delivering a lecture at the 2024 Bankers Dinner and Award Night organised by the Chartered Institute of Bankers of Nigeria Abia State Branch on the theme,
Professor Ogbonna who also examined the theories that support his position on monetary policy, spoke on the theme
“Response of Deposit Money Banks to Monetary Policy Dynamics in Nigeria”.
He added that it is also his view that since banks’ shock constitutes greater fluctuations in the banking industry, it is advised that banks outside the monetary policy measures, should do adequate credit analysis and appraisal before extension of credit to customers.
The academic Don said efforts were made to unravel the relationship and causal effects of monetary policy variables and the performance of deposit money banks in Nigeria.
According to him, a good number of tools were engaged to estimate the models specified, starting from those suitable for examination of global utility to VAR methodology.
Professor Ogbonna said the major findings are as follows:
“That cash reserve ratio negatively and significantly affects the performance of deposit money banks in Nigeria.
He pointed out that this shows that deposit money banks in Nigeria are starved of funds due to the high reserve ratio as always stipulated by the Central Bank of Nigeria. “No wonder Onoh (2007) opined that the Minimum reserve ratio is difficult to predict the right minimum reserves. He maintained that “It is considered not only risky but dangerous to toy with the instrument in the attempt to influence the reserve component of the monetary base equation; the monetary base itself being an unstable indicator variable under constant onslaught from exogenous variables”.
Professor Udochukwu Ogbonna continued that “This hampers the credit creation of deposit money banks in Nigeria, thereby negatively affecting their performance as found”.
“This corroborates the apriori expectation and study by Ndugbu and Okere (2015) and frustrates the Anticipated Income Theory”.
The BIR chairman further observed that the study found that other monetary policy variables were insignificant to the performance of deposit money banks in Nigeria corroborating the findings of Dare and Okeya (2017).
“It was discovered that own shock from bank performance exerts greater fluctuations in the banking business in Nigeria.
It was also revealed that apart from banks’ shock; banks respond negatively to shocks from major monetary policy instruments.
It was observed that Monetary Policy Rate causes bank performance (ROA) in both the short run and long run, while Cash Reserve Ratio, Liquidity Ratio, and Savings Deposit Rate do not cause ROA in the short run but in the long run. No wonder the Cash Reserve Ratio has a negative and significant impact on bank performance.
It was also established that monetary policy instruments jointly cause bank performance in the short and long run as opposed to individual instruments in Nigeria”.
In his speech, Branch controller Central Bank of Nigeria, Umuahia Branch, Olaoba Ayotunde Olamideji urged bankers to remain steadfast in their resolve to advance the cause of banking, foster financial inclusion, and contribute to the sustainable growth of the nation.
He advised them to allow the event strengthen their bonds and inspire them to greater heights of service and professionalism.
Mr Olaoba said the deposit Money Banks are central to the economic stability of Nigeria, and their response to monetary policy dynamics directly impacts the financial wellbeing of businesses and individuals, and it is a responsibility that demands their constant adaptability, innovation and commitment to ethical standards.
In her valedatory speech, the outgoing chairman CBIN Abia State branch Princess Chinenye Roseline Maxwell-Ogalabu expressed her deepest gratitude to all her colleagues for their support, encouragement, and cooperation during her tenure as Chairman.
Princess Chinenye stated that their trust and confidence in her was a tremendous source of strength and inspiration. While reflecting on their achievements, Chinenye added that she was proud of the progress they had made in promoting the interests of their members, advancing the banking profession, and contributing to the development of the state.
She thanked her colleagues for the opportunities to contribute to the growth and development of our profession at both state level with our state.
In his acceptance speech, the Chairman, CBIN Abia State branch, Camillus Dennis Ogonnaya Ogbuagu
said his vision is to build on the successes of the past while introducing innovative ideas to drive growth, inclusivity, and professionalism in their industry.
Dennis disclosed that his administration will focus on the following key areas:
-Drive financial base of the Institute in Abia Branch and enhancing the professional development of our members through training, mentorship, and networking opportunities.
-Strengthening our advocacy role to promote policies and regulations that support the growth of the banking industry in Abia State.
-Fostering collaboration and partnerships with other professional bodies, regulatory agencies, and stakeholders to advance our shared interests.
-Promoting financial inclusion, literacy, and education among the populace, particularly in rural and underserved communities.
He states that “i am confident that together, we can achieve great things and take our institute to greater heights”.
He also called on all members to join hands with him to build a stronger, more vibrant, and more relevant institute that truly reflects the values of excellence, integrity, and professionalism.
Earlier, the Chairman 2024 bankers week planning committee, Kelechi Adiele thanked their guests, colleagues for their coorporation which prompted the success of their annual bankers week.
The event featured the presentation of awards to some persons including Mazi Isaac Okorofor, a former staff of CBN and chairman of Zik FM Umuahia, chairman of masters Energy, Dr Uche Ogah who was represented among others.
