The Central Bank of Nigeria (CBN) has announced a reduction in the Loan-to-Deposit Ratio (LDR) for deposit money banks from 65 percent to 50 percent.
According to a letter issued by Adetona Adedeji, the Acting Director of the CBN’s Banking Supervision Department, addressed to all banks, this adjustment mirrors the 45 percent Cash Reserve Ratio (CRR) of banks and forms part of broader efforts to invigorate lending activities within the real sector.
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“Amidst a shift towards a more contractionary policy stance, it has become imperative to recalibrate the LDR policy to align with the current monetary tightening strategy of the CBN,” Adedeji stated. He emphasized that the 15 percentage point reduction corresponds with the recent increase in CRR rates for banks. All deposit money banks are mandated to adhere to this revised requirement, with daily average figures serving as the basis for compliance assessment.
Adedeji stressed the importance of deposit money banks upholding robust risk management practices in their lending operations. The CBN will maintain oversight to ensure compliance, continually evaluate market dynamics, and make adjustments to the LDR as necessary.
Under the updated directive, deposit money banks are now permitted to lend up to 50 percent of their deposits to customers.
The adjustment in the LDR is expected to stimulate lending activities, particularly in vital sectors of the economy, and support the CBN’s broader objectives of promoting economic growth and stability.
Credit: News Agency of Nigeria (NAN) Text Excluding Headline
