(Bloomberg) --
Nigeria’s central bank slashed the mandatory cash reserve requirement for banks that lend exclusively to companies in a bid to boost the availability of credit and ease borrowing costs.
The cash reserve ratio — the amount lenders have to keep with the central bank — for so-called merchant banks has been reduced to 10% from 32.5% “to boost the banks’ ability to avail increased infrastructure, real sector and other long-term financing,” the Central Bank of Nigeria said in a circular. The financiers complement commercial lenders, which provide banking services to businesses and individuals.
President Bola Tinubu’s administration wants to boost lending for infrastructure projects and spur growth in Africa’s biggest economy. Since taking over in May, Tinubu has ended a fuel subsidy that cost $10 billion last year, eased foreign-exchange controls and initiated a turnaround of the agriculture industry to lower food costs and create jobs.
The new merchant banks’ cash reserve requirement will be effective Aug. 1. The additional liquidity is expected to increase access to long-term funding for companies and moderate borrowing costs, which are as high as 28.3%, according to central bank data.
Six merchant banks are licensed to operate in the country, including RMB Nigeria Ltd., FBNQuest Merchant Bank Ltd. and Coronation Merchant Bank Ltd.
