Citigroup is calling for greater consistency in implementing regulations for the banking industry Africa and warned frequent changes will harm the sector.
The bank’s business was one of 12 lenders Nigeria’s central bank penalised last month for failing to meet credit-provision targets. Citigroup was handed a 100.7 billion naira ($279 million) penalty out of a combined sanction of 500 billion that was transferred from the lenders’ cash reserves to the regulator pending compliance. Less than a week later, the central bank raised the sector’s minimum loan-to-deposit ratio requirement to 65% from 60% and said the directive would be reviewed quarterly.
“We shouldn’t be changing things every six months and we shouldn’t be changing things midway” through, Ebru Pakcan, Citigroup’s head of treasury and trade solutions for Europe, Middle East and Africa, said in an interview in the Kenyan capital, Nairobi. “If it is something that is suddenly reversed six months later then there’s a huge opportunity cost for everyone who spent time and energy to fit into that,” she said.
Banks are also facing challenges elsewhere. In Kenya, lenders are wrestling with the uncertainty about how much they can charge for loans. Lawmakers in East Africa’s biggest economy have rejected the National Treasury’s proposal to repeal a contentious law that caps interest rates, despite opposition from the central bank governor and the High Court annulling it.
In South Africa, the continent’s most industrialised economy, the National Credit Amendment Act that was signed into law in August. It allows over-indebted consumers to have payments suspended in part or in full for as long as 24 months.