CBN Orders Banks To Lend 60% Of Deposits To Real Sector, Or…

In what may be an admission of the failure of its earlier directive that the nation’s banks lend their deposits warehoused as Cash Reserve Ratio (CRR) to the real sector at 9% (READ MORE), the Central Bank of Nigeria (CBN), has ordered them to maintain a minimum Loan to Deposit Ratio (LDR) of 60%.
In a letter to all banks titled “Regulatory measure to improve lending to the real sector of the Nigerian economy,” the apex bank warned that failure to lend as much as 60% of their deposit base to the real sector by September 30, 2019, subject to quarterly review.
According to the letter referenced BSD/DIR/GEN/MDD/01/045, dated July 3, 3019, and signed by Ahmad Abdullahi, Director of Banking Supervision, failure by the banks “to meet the above the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall of the target LDR.”
To encourage SMEs, retail, mortgage, and consumer lending, the directive added, “these sectors shall be assigned a weight of 150% in computing the LDR for this purpose.”
The CBN says it will provide a framework for classification of enterprises and businesses that fall under these categories.
The move, it noted, is part of plans “to ramp up growth of the Nigerian economy through investment in the real sector.