LDR: Banks Issue N3.3trn Credit To Economy
AMINA HUSSAINI, Abuja
The Nigerian banking sector has issued a total N3.3 trillion to the economy as they continue to implement the Loan-to-Deposit Ratio (LDR) policy of the Central Bank of Nigeria (CBN).
The apex bank had on July 3, 2019, directed banks to maintain a minimum LDR of 60 percent by September 30, 2019, the LDR, which is being reviewed quarterly to improve lending to the real sector, was 58.5 percent as of the end of May. It has now been raised to 65 percent for the last quarter of 2019.
Under the policy, defaulting banks have also been sanctioned several billion for failing to adhere to the LDR
The introduction of the LDR had enhanced credit into key sectors of the economy, which according to the CBN governor, Godwin Emefiele has pushed loans from banks to the economy from N15.6 trillion in June 2019 to N1.9 trillion by June 2020 with some of the productive sectors of the economy as beneficiaries.
Breakdown of the credit shows the Manufacturing sector received N815 billion; Retail and Consumer Loan Sector received N615 billion; Agriculture, Forestry and Fishery sector N255 billion; General Commerce, N221 billion, and; Information Technology Communications N208 billion.
Emefiele assured that the banking sector remains strong, resilient and could effectively finance the economy.
“The Nigerian banking system remains very strong and resilient. Unlike in other climes, the Nigerian banking system appears to be one of the well-regulated industries in the world today. As of May 2019, Non-Performing Loans in the industry is 11.1 percent, as in June 2020, it has dropped to 6.4 percent.
“For Capital Adequacy Ratio which measures the size of capital that bank deploys into risk asset, as in June 2019, CAR was 15.2 percent but as of June 2020, it remains flat at 15 percent.
“On liquidity ratio, by August 2019, it was 48 percent but as of June 2020, it had dropped to 37 percent.
“So what we are saying is that in spite of these large sums granted, from N15.6 trillion to about N18.9 trillion, the prudential ratios still looking so strong is a clear demonstration that the Nigerian banking sector remains very strong and resilient and able to support Economic Development of Nigeria.”
Speaking on the impact of the Covid-19 intervention fund, the Governor said over N152.9bn has been disbursed to 61 manufacturing companies out of the N1trn allocated for that sector.
He also said 20 healthcare projects have been funded to the tune of N26.27bn out of the N100bn earmarked for that segment of the economy.
Under the Agricultural Small and Equity Intervention Fund, he said the apex bank had funded 11,613 businesses badly affected by the crisis with over N41bn, Out of N50bn for the household and small enterprises affected by Covid-19, he said the CBN had disbursed to over 92,000 people the sum of N49.15bn.
He said the MPC endorsed that the CBN needs to increase the household and SME facilities to accommodate more of these SMEs to help them easily recover from the crisis.
Speaking on loan fore-bearance given to bank customers, Emefiele said “the health crisis ocassioned by the pandemic itself would have resulted in a doomsday for the banking industry and the economy if the CBN did not ask the banks to offer this fore-bearance to their customers.
On the strength of this fore-bearance, he said “ 22 banks out of 27 of them have come to the Central bank to restructure 35, 640 of their customers for about N7.8 trillion which constitutes 41 percent of the total industry loans which is N18.9 trillion.
The Governor said the N7.8trillion fore-bearance was low, as the apex bank would prefer a situation where the 41 percent is raised to 65 percent of the total loan portfolio of N18.9trn.
He added, “We are working with the banks to give more fore-bearance to those customers. If we see fore-bearance moving to 60 or 65 percent we get more comfortable that we have been able to turn the corners by assisting businesses to get over their business and come again back to life.
“Loan forbearance has helped us prevent a doomsday scenario for the economy. Emefiele said
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