As part of the Central Bank of Nigeria’s (CBN) attempt to intervene on behalf of businesses that operate in the real sector and improve lending to them by Deposit Money Banks (DMB), the CBN issued the ‘Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy’ circular on 3 July 2019 and a supplement to it on 30 September 2019. According to the circular and supplement, all DMBs are required to maintain a minimum Loan to Deposit Ratio (LDR) of 65% by 31 December 2019 and failure to meet the minimum threshold by the specified date will result in the DMBs being penalised.
In this article, Tolulope Ogidi and Rachael Ehima discuss the circular and the supplement, the CBN’s rationale for issuing them and conclude that it is necessary that some mechanisms be put in place to create a favourable landscape for borrowers in order for the CBN’s regulations to be fully effective.