Regulatory Alerts2024-04-17 | BSD/DIR/PUB/LAB/017/005RE: Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy
The Central Bank of Nigeria has issued a letter to all banks, announcing a reduction in the loan-to-deposit ratio (LDR) by 15 percentage points to 50%, aligning with the current monetary tightening. All DMBs are required to maintain this level, with the CBN monitoring compliance and reviewing market developments. The letter emphasizes the importance of strong risk management practices in lending operations.
Central Bank of Nigeria Banking Supervision Depa Central Business Dis Phone: +234 700-225-5226, +234 800-225-5226 BSD/DIR/PUB/LAB/017/005 April 17, 2024 LETTER TO ALL BANKS RE: REGULATORY MEASURES TO IMPROVE LENDING TO THE REAL SECTOR OF THE NIGERIAN ECONOMY The Central Bank of Nigeria's (CBN) regulatory directive on the above subject dated January 20, 2020, referenced BSD/DIR/GEN/LAB/12/070 refers. Following a shift in the Bank's policy stance towards a more contractionary approach, it is imperative to review the loan-to-deposit ratio (LDR) policy to align with the current monetary tightening by the CBN.
Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50%, in a similar proportion to the increase in the CRR rate for banks. All DMBs are required to maintain this level and are further advised that average daily figures shall continue to be applied to assess compliance. While DMBs are encouraged to maintain strong risk management practices regarding their lending operations, the CBN shall continue to monitor compliance, review market developments, and make alterations in the LDR as it deems appropriate.
Please be guided accordingly.
Yours faithfully, DETONA S. ADEDEJI AG. DIRECTOR, BANKING SUPERVISION DEPARTMENT