- CBN has announced an upward review of the country's loan to deposit ratio (LDR) for banks to 65% from 60%.
- All banks are expected to meet the new requirements by December 2019 or face sanctions.
- The policy is to tackle loan defaults while increasing lending to the real sector of the economy.
Nigeria's credit sector recorded a 5.33% growth from N15.57 trillion at the end of May 2019, to N16.40 trillion as at September 26, 2019, according to the Central Bank Of Nigeria (CBN).
This follows the new CBN measures to grow the Nigerian economy through investment in the real sector.
Due to the increase, the central bank announced an upward review of the country's loan to deposit ratio (LDR) for banks to 65% from the present 60%.
In a circular issued on Monday, September 30th, all banks are expected to meet the new requirements by December 2019 or face sanctions.
“The Central Bank of Nigeria (CBN) has noted the appreciable growth in the level of the industry gross credit, which increased by N829.40 billion or 5.33%.
“In order to sustain the momentum and in line with the provisions of our earlier letter, the minimum Loan to Deposit Ratio (LDR) target for all Deposit Money Banks (DMBs) is hereby reviewed upwards from 60% to 65%.
“Consequently, all DMBs are required to attain a minimum LDR of 65% by December 31, 2019, and this ratio shall be subject to quarterly review,” the statement reads.
In July 2019, the banking regulator set at least 60% minimum loan-to-deposit ratio (LDR) to encourage lending to small businesses and consumers and more mortgages.
The essence of this is for banks to lend more to customers, mostly the real sector of the economy while maintaining a safe and sound financial system.
Meanwhile, at the end of its policy-setting meeting last month, the Monetary Policy Committee (MPC) urged the apex bank to fast-track the development of the credit scoring system, to promote increased intermediation.