Following CBN’s Directive , Banks Grow Loans By N800bn
Deposit Money Banks (DMBs) in the country have grown the loan book by N800bn in an aggressive drive to comply with the 60 per cent Loan-to-Deposit Ratio (LDR) mandate given by the Central Bank of Nigeria (CBN). Recall that in a bid to boost economic growth, the CBN recently mandated DMBs to give out a minimum of 60 per cent of their deposits as loans with effect from September, 2019.
The apex bank, in a letter to all banks titled: “Regulatory Measures to Improve Lending to Economy”, signed by its Director (Banking Supervision), Ahmad Abdullahi, stated that, “In order to ramp up growth in the Nigerian economy through investment in the real sector, CBN has approved the following measures: All DMBs are hereby required to maintain a minimum Loan to Deposit Ratio (LDR) of 60 per cent by September 30, 2019.
This ratio shall be subject to quarterly review.’’ The Monetary Policy Committee (MPC), after its meeting at the weekend, noted the growth in the size of industry loans from N15.4tn in June to N16.23tn in September, 2019 MPC further noted the improvements in the financial soundness indicators and urged the management of the CBN to sustain its regulatory surveillance to ensure continued financial system stability.
The committee underscored the need to grow consumer, mortgage and corporate credit to drive aggregate demand and ensure a reduction in unemployment and increase in output growth. Consequently, the committee urged the management of CBN to fast-track the development of the credit scoring system. It further commended the introduction of the Global Standing Instruction (GSI) initiative aimed at de-risking credit in the industry by committing bank customers to repay their loans to banks.
The MPC noted the increased supply of micro credit to key Micro Small and Medium Enterprises (MSMEs) and effort through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank to extend the reach of its credit facilities across the country, but, however, observed that the growth in credit to the private sector remained significantly low, relative to the absorptive capacity of the economy.
