The Central Bank of Nigeria has directed all Deposit Money Banks to reduce the Loan-to-Deposit Ratio (LDR) to 50% from 65%.
In a statement by CBN signed by the Acting Director, Banking Supervision Department, Dr Adetona Adedeji, the apex bank stated thus:
Following a shift in the Bank’s policy stance towards a more contractionary approach, it is imperative to review the loan-to-deposit ratio (LDR) policy to align with the current monetary tightening by the CBN.
Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50%, in a similar proportion to the increase in CRR rates for banks. All Deposit Money Banks (DMBs) are required to maintain this level and are further advised that average daily figures shall continue to be applied to assess compliance.
While DMBs are encouraged to maintain strong risk management practices regarding their lending operations, the CBN shall continue to monitor compliance, review market development, and make alterations in the LDR as it deems appropriate.