January 19, 2009

Lagos-A broad-based liquidity crisis in the financial system, in which even banks are refusing to lend to one another, has forced the Central Bank to quietly allow some banks to use dodgy assets as collateral to draw up to N941 billion in taxpayer funds.

The use of public funds in what the Bank calls an expanded discount window amounts to a back-door bailout of seriously overstretched banks, which are feeling the chill of the worldwide economic crisis and the hasty withdrawal from our market of cash-strapped international investors.