CBN reduces banks’ Loan-to-Deposit Ratio to 50%

The Central Bank of Nigeria, CBN, has reduced deposit money banks’ Loan-to-Deposit Ratio, LDR, to 50 per cent from 65 per cent to boost lending capacity.

This is according to a letter by Dr Adetona Adedeji, CBN’s Acting Director of the Banking Supervision Department, addressed to all banks.

Adedeji said the reduction was similar to the Cash Reserved Ratio of banks, which is 45 per cent.

He said that the directive was part of measures to deepen monetary policy tightening and improve lending in the real sector of the economy.

“Following a shift in policy stance towards a more contractionary approach, it is imperative for the LDR policy to align with the current monetary tightening of the CBN.

“Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50 per cent, similar to the increase in CRR rates for banks.

“All deposit money banks are required to maintain this level and are further advised that average daily figures shall continue to be applied to access compliance,” he said.

The implication is that banks can now lend 50 per cent of deposits to their customers.

The development comes weeks after the apex bank raised banks’ minimum capital requirement by at least 100 per cent.