As part of its commitment to promote growth in the real sector of the Nigerian economy, the Central Bank of Nigeria (“CBN”) recently issued a letter to all banks introducing regulatory measures to improve lending to the real sector. The regulatory measures introduced by the CBN are as follows:
· All Deposit Money Banks (“DMBs”) are required to maintain a minimum Loan to Deposit Ratio (“LDR”) of 60% by 30 September 2019. The LDR will be reviewed quarterly; and
· To encourage small and medium enterprises, retail, mortgage and consumer lending, a weight of 150% in computing the LDR shall be assigned to the mentioned sectors.
Any DMB that fails to meet the prescribed LDR by the specified date will be subject to a levy of additional cash reserve requirement equal to 50% of the lending shortfall of the target LDR. It is expected that these regulatory measures will facilitate in ramping up growth and investment in the real sector of the Nigerian economy.
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