Central Bank of Nigeria
Central Bank of Nigeria

CBN Orders Banks To Give Out 60% Of Deposits As Loans

Margaret Solace

The Central Bank of Nigeria has issued a directive to all banks operational within the nation to start handing out 60% of deposits as loans in order to promote and empower the Small and Medium Enterprises (SMEs) as well as other businesses owned by local citizens.

This mandate, which was conveyed in a letter to various banks and signed by the Director of Banking Supervision, Ahmad Abdullahi, is said to be one of CBN’s techniques to improve the country’s economy.

The letter further expressed that the ordinance is aimed at improving the rate of investments in the SME sector so as to grow the nation’s economy.

It was expressed in the letter that, “To encourage lending to small businesses and consumers and more mortgages, these sectors shall be assigned a weight of 150% in computing the LDR.”

The Central Bank also emphasized that banks who fail to comply by the new rule would be punished with increases in cash reserve ratios.

“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall of the target LDR.”

The Central Bank of Nigeria had recently received encomiums for the excellent monetary policies that had been masterminded into the economy. With references to the successes recorded in the foreign exchange market and the agricultural sector, it is expected that this new rule will influence the Nigerian economy positively.

Happenings Media