A couple of months ago, the Central Bank of Nigeria (CBN) basically told commercial banks in Nigeria to “lend or die.”
Quite simply, the country’s apex bank had become fed up with banks hoarding all the cash and profiting off of it, when some of those funds could go into actually growing the local economy.
So, the CBN issued a directive in where it ordered Nigerian banks to get their act together, and the directive came with a deadline too.
Per the new directive, banks will now have to maintain a loan-to-deposit ratio (LDR) of at least 60 percent or face stiff penalties.
In plain language, the CBN wants Nigerian banks to adjust their books before September 30, and the adjustment should reflect that the banks are now giving out nearly as much cash as they are keeping in.
The CBN directive could be seen as a way of compelling banks to give out loans to local industries and businesses that are in need of them. This, it hopes, will boost local productivity and foster economic growth at the national level.
Well, the economic growth is yet to manifest but one thing that is certain is that the CBN’s September 30 deadline really did send banks in some kind of race against one another to lend the most.
How Bank Lending Has Surged In Nigeria
As the deadline approaches, reports show that the total bank loans to customers of the thirteen (13) Nigerian banks listed on the Nigerian Stock Exchange (NSE) stood at NGN 15.9 Tn as of June 2019.
Meanwhile, the reports further show that the total loans and advances rose to NGN 17.7 Tn as of June 2019, from NGN 16.15 Tn in December 2018. This suggests the 13 listed banks increased total loans and advances by NGN 1.5 Tn between January and June 2019.
Digging deeper into the financials of the listed banks reveals that while total loans and advances reached NGN 17.7 Tn this year, banks’ deposits as of June 2019 stood at NGN 28.3 Tn. This means that, collectively, the 13 listed banks currently have a 62 percent loan-to-deposit ratio. Which Banks Are Lending The Most? Although Ecobank Transactional Inc (ETI) appears to be topping the charts with the largest amount of loans, lending data for its Nigerian subsidiary, Ecobank Nigeria, is not available, which makes it hard to determine if the bank is really doing the most.In any case, the FUGAZ […]