The Central Bank of Nigeria, has announced a review of the Loan-to-Deposit Ratio for banks from 65 percent to 50 percent.

All Deposit Money Banks are now allowed to lend only 50 percent of their deposit to customers

In a new directive, issued on April 17, 2024, with reference number BSD/DIR/PUB/LAB/017/005 and signed by Adetona Adedeji, the CBN Acting Director of Banking Supervision, said the apex bank said it had reduced the Loan-to-Deposit ratio by 15 percentage points, down to 50 percent.

It stated that the Deposit Money Banks are required to maintain this level and are further advised that average daily figure shall continue to be applied to access compliance.

Meanwhile, the DMBs are encouraged to maintain strong robust risk management practices in their lending operations, the CBN said it was committed to continuous monitoring of compliance with the directive.

Adedeji has called on all banks to acknowledge these modifications and adjust their operations accordingly.

He stressed that the regulatory adjustment was anticipated to significantly influence the banking sector and the wider Nigerian economy.

The circular stated in part, “Following a shift in the Bank’s policy stance towards a more contractionary approach, it is crucial to revise the loan-to-deposit ratio policy to conform with the CBN’s ongoing monetary tightening.

“Consequently, the CBN has decided to decrease the LDR by 15 percentage points to 50 percent, proportionate to the rise in the CRR rate for banks.

“All DMBs must maintain this level, and it is advised that average daily figures will still be applied for compliance assessment.

“While DMBs are urged to sustain strong risk management practices concerning their lending operations, the CBN will persist in monitoring compliance, reviewing market developments, and making necessary adjustments to the LDR. Please be guided accordingly.”