The Central Bank of Nigeria (CBN) has recently made a significant change to boost lending capacity in the country. In a letter addressed to all banks, Dr. Adetona Adedeji, CBN’s Acting Director of the Banking Supervision Department, announced a reduction in the Loan-to-Deposit Ratio (LDR) from 65 per cent to 50 per cent.
This move is in line with the CBN’s efforts to tighten monetary policy and encourage lending in the real sector of the economy. Adedeji explained that the reduction in the LDR is similar to the Cash Reserve Ratio (CRR) of banks, which currently stands at 45 per cent.
In his statement, Adedeji emphasized the importance of aligning the LDR policy with the CBN’s current monetary tightening approach. He stated, “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.”
As a result of this change, banks are now required to maintain a 50 per cent LDR, allowing them to lend up to half of their deposits to customers. This adjustment comes shortly after the CBN increased banks’ minimum capital requirement by at least 100 per cent.
Overall, this decision by the CBN aims to stimulate lending activities and support economic growth in Nigeria. By reducing the LDR, the central bank hopes to increase access to credit for businesses and individuals, ultimately driving investment and development in the country.
