The Central Bank of Nigeria (CBN) has revised the loan-to-deposit ratio (LDR) for banks, lowering it from 65 percent to 50 percent. This adjustment is part of the current monetary tightening measures. The decision was communicated through a circular titled ‘Re: Regulatory Measures to Improve Lending to the Sector of the Nigerian Economy’ issued by the apex bank on Wednesday.
The aim of this revision is to ensure alignment with the prevailing monetary policy direction. According to the circular, the reduction in the LDR by 15 percentage points is consistent with the recent increase in the Cash Reserve Ratio (CRR) rate for banks.
Commercial banks are now required to maintain this revised LDR level, with average daily figures being used to assess compliance. While banks are encouraged to uphold strong risk management practices in their lending operations, the CBN will continue to monitor compliance closely.
Additionally, the circular highlighted the recent cessation of daily CRR debits from deposits in commercial banks, which was announced by the CBN on February 2. The CRR is a tool used by the CBN to manage liquidity in the economy.
The revision of the LDR underscores the CBN’s commitment to ensuring a balanced and robust financial system in Nigeria. It aims to promote sustainable lending practices while maintaining stability in the banking sector.
