CBN Plans to Raise LDR to 70%

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  • CBN Plans to Raise LDR to 70%

In a bid to further stimulate growth and compel deposit money banks to increase credit facility to private sector, the Central Bank of Nigeria plans to raise loan-to-deposit ratio (LDR) from present 65 percent to 70 percent.

Mr Hassan Mahmoud, Deputy Director, Financial Policy & Regulation Department, CBN, disclosed this while speaking at the 2019 workshop for Finance Correspondents and Business Editors in Yola, Adamawa State.

The CBN had raised the LDR from 60 percent to 65 percent in September with December 31, 2019 as the deadline for compliance.

“Consequently, all DMBs are required to attain a minimum LDR of 65 per cent by December 31, 2019 and this ratio shall be subject to quarterly review. To encourage Small and Medium Enterprises, retail mortgage and consumer lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose,” the apex bank stated in October.

“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall implied by the target LDR.”

Bello said because of the success of the program, the apex bank will raise the LDR to 70 percent in 2020.

In October, Godwin Emefiele, the Governor, CBN, said banks’ credit to the private sector rose to over N16 trillion after the LDR directive was implemented. This, he said would help stimulate local production, especially at a period when land borders are closed.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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