Nume Ekeghe
The Central Bank of Nigeria (CBN) has noted that its loan to deposit ratio (LDR) policy which it commenced in 2019 has since given out N7 trillion in loans in three years.
Recall that the CBN had in July 2019 increased the required minimum LDR to 60 per cent and further reviewed it forward to 65 per cent later in the year which has since boosted the real economy as well as increased retail lending to households.
The Deputy Governor, Financial Systems Stability, Mrs. Aishah N. Ahmad, disclosed this on the sidelines at the 40th anniversary summit of Financial Institutions Training Centre (Fitc) in Lagos yesterday.
She noted that the CBN under the stewardship of Governor Godwin Emefiele was committed towards an inclusive growth and LDR policy which has been positive, citing that N7 trillion in retail loans was an unparalleled record.
She said: “Over the years the CBN has tried to ensure that we drive lending to the real sector, you would agree with me that the policy under Governor Emefiele over the last few years, has really emphasised on this, not only in terms of intervention funds given but in terms of some of the policies put in place such as loan to deposit ratio (LDR) which when we instituted it in 2019 till now actually added about N7 trillion or so in loans, and which is quite unprecedented.”
Also, on the stability of the banking sector, she added that all metrics and indicators point that the banking sector is strong, stable and has been a catalyst towards Nigeria’s recovery.
She added: “We’re very positive about the resilience and the soundness of the banking sector. You see the reports as we give them from time to time from the MPC. Actually, the banking system has been very strategic in support of the recovery based on the impact of COVID.
“Some of the forbearance that we granted to the banking sector has helped to ensure they retain their capacity to lend and it has helped them give succour to their obligors and we are seeing some obligors come out of that forbearance now.
“The financial soundness indicators have been very strong on capital, liquidity, and we’re very proud and we just want to continue to ensure that the bank system continues to provide lending, not just wholesale or commercial lending but to small business because that will be the engine of the economy.”
She added: “So, we’re very proud of what we’ve achieved. We continue to be mindful, though, looking out and to be proactive looking out to where the risk lies as we are not quite out of COVID yet. So still try to look out for some of the headwinds that may come in, but we’re very confident that we’ll be resilient through any of the challenges.”
Furthermore, in her keynote address she added that the African Continental Free Trade Area (AfCFTA) would invent new opportunities for the financial sector.
She said: “Africa, a diverse continent of 54 countries, boasting one of the youngest populations around the world and with thriving economies, rich with enormous and diverse talent, material, and natural resources should be well positioned to deliver prosperity, create wealth and higher living standards for its over 1 billion citizens. However, we are yet to fully realise and harness this potential. The problems and idiosyncratic challenges have been well documented.
“Notwithstanding, there is significant room for our continent to leverage the bright spots, particularly the digital transformation and technology innovation being witnessed in the economy and financial ecosystem to foster more prosperity and reduce income inequality.
“This innovation has intensified growth in the size and significance of banks and other financial institutions, created new opportunities for new entrants and increased integration with global finance and capital markets. The African Continental Free Trade Area (AfCFTA) and its focus on intra-Africa trade, the pilot of the Pan-African Payments and Settlement System (PAPSS) and Africa’s positioning to benefit from the increased funding and opportunities as part of the outcomes of the climate change conference (COP26), are just a few critical drivers that should fuel growth in the near to medium term.
“These significant developments have put conversations on Africa’s potentials back on the front burner. Clearly, the financial system will be pivotal in the realisation of Africa’s huge potentials just like it has in charting the economic recovery path from COVID 19,” she added.
