CBN Lauds Banks On Investment, Raises LDR

By Tosin Olatokunbo

The Central Bank of Nigeria has lauded deposit money banks, DMBs for pushing its investment drive in the country.

Investment analysts who spoke with the magazine said there’s a steady rise in credit to major sectors of the economy in the last few months.

But it doesn’t seem the Godwin Emefiele led CBN is satisfied yet with the performance, and has therefore increased the Loan to Deposit Ratio, LDR from 60 per cent in the last quarter of last year to 65 per cent.

The magazine learnt from competent sources in CBN that the LDR would still be migrated higher in the next quarter.

The apex bank, through the LDR instrument has made sure that banks make funds available for the private sector to grow.

It has also punished erring banks that failed to comply with the directive.

Three times last year, the CBN increased the LDR by significant a figure, not in a way that will affect the liquidity of the commercial banks.

Rolling out the performance figure on Wednesday, the apex bank disclosed that lending to various sectors have increased significantly.

The CBN said there has been upward increase of 150 per cent in respect of lending to the Small and Medium Enterprises, retail, mortgage and consumer lending.

The apex bank said it will not hesitate to punish any violating bank.

Failure to comply will now attract a levy of additional Cash Reserves Requirements of 50 per cent of the lending shortfall of the target LDR on or before March 31, 2020, CBN said in a statement on Wednesday.

According to the release, “The CBN has noticed remarkable increase in the size of gross credit by the DMBs to customers.

Accordingly, the CBN has decided to retain the minimum 65 per cent LDR in the interim.

All the DMBs are required to maintain this level and are further advised that average daily figures shall be applied to assess compliance going forward.”

It disclosed that a further review will be conducted by the end of March to measure compliance.

“The incentives which assign a weight of 150 per cent in respect of lending to the SMEs, retail, mortgage and consumer lending shall continue to apply while failure to achieve the target shall continue to attract a levy of additional cash reserves requirement of 50 per cent of the lending shortfall of the target LDR on or before March 31, 2020,” the apex bank said