Thursday, August 22, 2019
Nigerian banking innovations.
After complaints over the slow growth of commercial bank lending specifically to preferred sectors, the Central Bank of Nigeria (CBN) recently proposed a range of new policy measures. This includes a new minimum loan-to-deposit ratio (LDR) target of 60% for all commercial banks, and that loans extended to small and medium-sized enterprises (SMEs), retail, mortgage and consumer lending be weighted at 150%. Banks are required to conform to the new requirements by September 30.
- Liquidity outflows from banks that opt to drop expensive deposits may lead to pressure on the naira.
- The interplay of the new LDR policy and CBN Treasury Bills' maturities will prompt uncertainty in currency and debt markets.
- Newly created banks are even more unlikely to be able to expand their loan book quickly enough to meet the new requirements.