May 13, 2024

Nigerian Economic Update (Issue 16)

The Central Bank of Nigeria (CBN), in a recent letter, has announced the reduction of the Loan-to-Deposit Ratio (LDR) of commercial banks from 75 percent to 50 percent, indicating a decline of 15 percentage points. The LDR, a tool used by the CBN to influence the lending behaviour of commercial banks, is the ratio of a bank’s total loans to its total deposits. A low LDR means banks will lend out smaller portions of its deposits, and vice versa. The central bank’s move to reduce the value of LDR is part of its approach to maintain monetary tightening in the economy.

Download Label
March 13, 2018 - 4:00 am
application/pdf
427.64 kB
v.1.7 (stable)



Related

 

Nigeria Economic Update (Issue 5)

The Naira continued to depreciate in the review week. At the parallel market, naira exchanged for N498/$ on January 27, 2017 and N500/$ on February 3, 2017. Despite the weekly sales of forex to BDCs and the significant improvements in the external reserves, the naira has continued to lose value to other currencies. The pressure on the naira has been triggered by escalating scarcity of forex in the spot market, likely due to forex hoarding. However, in the preceding week, the CBN sold $660 million in forwards contract in an attempt to manage liquidity and stabilize the naira. In the face of growing speculation in the parallel market, the monetary authority should institute mechanisms that would discourage excessive forex hoarding among licensed BDC operators. An initiative that monitors transaction dealings in the parallel market would go a long way in detecting erring BDC operators.