Connect with us

Business News

BOOM: CBN issues new circular that could force banks to lend to nearly everyone.

The Central Bank of Nigeria has issued a circular mandating commercial banks to lend up to 60% of the customer deposits.



The Central Bank of Nigeria (CBN) has issued a circular mandating commercial banks operating in the country to lend out up to 60% of their customer deposits. The Governor of the apex bank, Godwin Emefiele, had informed attendees at the 2019 Africa Investors’ Conference (AIC) which took place in London between June 25 and 27 of his plan to issue this regulation.

Order from above:  In military fashion, the Central Bank ordered all banks to maintain a minimum loan to deposit ratio of 60% by September 2019. The ratio will be reviewed quarterly.

To determine the 60% ratio, the CBN will assign SME, Mortgage, Retail and Consumer lending a combined weighting of 150%.

The CBN also said that banks that fail to meet this requirement would risk seeing their cash reserve ratios increase to 50%. This means 50% of a bank’s deposit will be immediately sent to the CBN.

[READ: CBN mandates microfinance banks to get 64 new customers per month]

GTBank 728 x 90

Current data: According to the data released in March by the Nigerian Bureau of Statistics (NBS), Nigerian banks currently have non-performing loans of about N1.69 trillion (N2.19 trillion as at April 2018). The data also revealed that commercial banks had a total deposit of about N27 trillion out of which about N15 trillion or 55.5% was money lent to the private sector.

What this means: In an article published on Nairametrics, we reported that the CBN Governor revealed that the apex bank would issue a circular that would address the paucity of loans available to the private sector.

We also reported in the article that he blamed the inability of banks to lend to the private sector on the latter’s choice of investing in risk-free securities rather than lending to the real sector of the economy. The immediate implication of this is that rather than engaging in moral suasion, banks are now being forced to lend money to sectors of the economy where risks are higher.  In fact, just about anyone could get a loan at this rate.

The future implications are that banks will be exposed to higher loan losses which could impact significantly on their profitability. They will also have to invest heavily on strategies that can help mitigate against lending risk, thus increasing their cost to income ratios.

Quick Loan Banks relying on FinTech to drive consumer lending will as well face increasing competition from bigger commercial banks.

The CBN’s target appears to be the informal sector of the economy. Unfortunately, most of the players have projects or funding requirements that are hardly bankable, either because of lack of adequate collateral or evidence of steady cash flows.

On the other hand, if the CBN achieves its aim, it will be a major boost for credit rating agencies who are increasingly pivotal to lending beyond collaterals.

[READ ALSO: Emefiele unveils 5-year plan, targets double digit growth]

The other positives of the CBN’s directive: On the flip side, companies with strong cash flows and collateral will have significantly higher chances of obtaining loans.

GTBank 728 x 90
Fidelity ads

It could be a major boost for Nigeria’s real estate sector which has been wallowing in negative GDP growth rates and only able to eke out a growth rate of 0.23% in the first quarter of this year.

Also, home buyers with good jobs may easily secure mortgages as more banks will consider this a better lending option, since the loans will be secured against the property.

Feedback: Initial reactions from banks who received the circular suggest that they were shocked. Though they understood that Godwin Emefiele could be a hard nut, this is one regulation too much for them. Some claimed that two months is too short for them to start complying with the directive.


[YOU SHOULD ALSO READ: FG to recover $7 billion bailout fund from commercial banks]


Coronation ads

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.



  1. awesomeJ

    July 4, 2019 at 4:02 am

    Really nice development if you ask me. We’re looking at c. N1.3 trn that could leave government securities to become real sector loans.

    If I may, I’d like to point out an observation in the article.

    You wrote that if a bank didn’t meet up with the LDR target of 60%, it’s CRR would be raised to 50%.

    That’s not quite what the directive states.

    Also, you perhaps implied that the directive was compelling banks to do more of the higher-risk retail lending. It isn’t exactly true.

    Let’s put in numbers to clarify:

    So you’re bank XYZ and with the license you got from the CBN, you have a deposit of N 1trn.

    For security reasons, you’re expected to keep N225bn with the CBN as CRR.

    Now with this new policy, You’re also expected to lend out N 600bn of the remaining N775bn to the real sector.

    Now if hitherto, you’ve only lent out N400bn, and kept N375bn in T-bills, this new directive states that you have an LDR shortfall of N200bn (600bn target-400bn actual). Now they won’t force you to increase your lending, they will only take 50% of that 200bn shortfall off your books as additional CRR, taking your CRR to N325bn, with you having just a Max of N275bn (against the old N375bn) to now stash in T-bills. So your new CRR effectively becomes 32.5% and not 50%.

    However, if out of your N400bn lending, N200bn is done to retail, mortgage and SMEs, the CBN assigns that N200bn a 150% weighting meaning that they count it as N300bn, and then see your total lending as N500bn, even though it’s just N400bn, that means your LDR shortfall is no longer reckoned to be N200bn rather it’s now N100bn.
    So, they’re only incentivising banks to lend to these sectors and not exactly forcing them.

    Again, I’d say kudos to them for such a beautiful policy. Only downside is it may be less likely for that N3 dividend I’m counting on ZENITHBANK for to happen.

    Sorry for the length.

    • Okujere Peter Precious

      July 4, 2019 at 7:48 pm

      You are brilliant

    • Anonymous

      July 11, 2019 at 9:34 am

      Thank you so much for this.

  2. Mr Lagos

    July 12, 2019 at 5:19 pm

    Exactly… Very well explained!

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.


COVID-19 Update in Nigeria

On the 23rd of September 2020, 111 new confirmed cases and 2 deaths were recorded in Nigeria



The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 57,724 confirmed cases.

On the 23rd of September 2020, 111 new confirmed cases and 2 deaths were recorded in Nigeria, having carried out a total daily test of 3,177 samples across the country.

To date, 57,724 cases have been confirmed, 48,985 cases have been discharged and 1,102 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 484,051  tests have been carried out as of September 23rd, 2020 compared to 480,874 tests a day earlier.

COVID-19 Case Updates- 23rd September 2020,

  • Total Number of Cases – 57,724
  • Total Number Discharged – 48,985
  • Total Deaths – 1,102
  • Total Tests Carried out – 484,051

According to the NCDC, the 111 new cases were reported from 12 states- Lagos (31), Gombe (18), Kaduna (18), FCT (15), Rivers (14), Imo (3), Kwara (3), Oyo (3), Bayelsa (2), Ogun (2), Edo (1), Osun (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,086, followed by Abuja (5,598), Plateau (3,304), Oyo (3,236), Edo (2,616), Kaduna (2,377), Rivers (2,277), Delta (1,800), Ogun (1,774), Kano (1,734), Ondo (1,606), Enugu (1,285), Ebonyi (1,038), Kwara (1,028), Abia (881), Gombe (857). Katsina (848), Osun (818),  Borno (741), and Bauchi (692).

GTBank 728 x 90

Imo State has recorded 565 cases, Benue (473), Nasarawa (449), Bayelsa (397),  Jigawa (322), Ekiti (317), Akwa Ibom (288), Niger (259), Adamawa (234), Anambra (232), Sokoto (161), Taraba (95), Kebbi (93), Cross River (85), Zamfara (78), Yobe (75), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous


GTBank 728 x 90
Fidelity ads



Continue Reading

Economy & Politics

Buhari to finally send Petroleum Industry Bill to National Assembly next week

Sources in the Presidency have disclosed that the President may be presenting the bill to the National Assembly.



Four dangerous circumstances forces FG to close Enugu Airport until further notice, aviation sector. FG’s conditional cash transfer progarmme gets more beneficiaries despite criticism

President Muhammadu Buhari is expected to present the long-awaited Petroleum Industry Bill (PIB) to the Senate as early as next week.

According to Reuters, who were quoting 4 sources familiar with the development, the presentation of the bill to the National Assembly, follows its official approval by the president late last week. This is as the National Assembly has already formed teams of members that will work most closely on the individual portions of the bill.

Both chambers of the National Assembly must have to pass the bill after deliberating on it before it can then be passed on to the president for his final signature.

The PIB which is an oil reform bill has been in the works for about 20 years, is key to the repositioning of Nigeria’s Oil and Gas Industry under its post-COVID-19 agenda as the main laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxes, payments to local communities, terms and revenue sharing within Nigeria.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), had disclosed that the delay and non-passage of the bill has made international investors to start losing confidence in the country’s oil and gas industry.

GTBank 728 x 90

While revealing last month that the PIB will be presented to the National Assembly in the next few weeks, the Minister of State for Petroleum Resources, Timipre Sylva, also said that the executive arm will be requesting the lawmakers to specially reconvene to receive and start deliberations on the bill.

These oil reforms and regulatory certainty became more pressing this year as low oil prices and a shift towards renewable energy made competition for investment from oil majors tougher.

The draft copy of the bill which was prepared by the Petroleum Ministry is a product of series of consultation between the federal government, oil and gas companies and other industry stakeholders.

Excerpts from the bill reported by Reuters include provisions that would streamline and reduce some oil and gas royalties, increase the amount of money companies pay to local communities and for environmental clean-ups alter the dispute resolution process between companies and the government.

It also included measures to push companies to develop gas discoveries and a framework for gas tariffs and delivery. Commercializing gas, particularly for use in local power generation, is a core government priority.

Continue Reading


UK-based group to investment $245 million in 100 Nigerian businesses

A UK based organization is to partner local investment funds to disburse $245 million to 100 Nigerian businesses.



UK based organization partner local investment funds to disburse $245 million to 100 Nigerian businesses

A UK-based development finance institution, CDC Group, has finalized plans to invest US$425 million as an aid to 100 businesses and 38,000 jobs in Nigeria.

This is sequel to its partnership with 40 investment funds such as Afreximbank, African Capital Alliance and Indoram, NAN reports

In a virtual visit to the country by the board of the organization led by Chief Executive, Nick O’Donohoe and Chairman, Graham Wrigley, the UK Government-funded organization stated that all earnings from its investments are ploughed back to improve the lives of millions of people in Africa and South Asia.

CDC Group noted that it paid a virtual visit to the Vice President of Nigeria, Prof. Yemi Osinbajo, and British High Commissioner to Nigeria, Catriona Laing, to discuss and ascertain the impact of CDC’s aid to its investees through the COVID-19 crisis and understand how to stimulate recovery and growth.

The discussions also focused on CDC’s own response to the pandemic through its preserved, strengthen and rebuild programme, the statement said

GTBank 728 x 90

(READ MORE: WHO to secure initial COVID-19 vaccine for 20% of Africans)

Commenting on the rationale of the aid, the Chief Executive of the CDC Group, Nick O’Donohe said that, “Nigeria plays a key part in our strategy of partnership and investment for economic growth in West Africa. “Hosting our 2020 board trip– albeit virtually – in both markets is a testament to our commitment.

“Looking forward, we will continue to prioritise the post-COVID-19 recovery as part of the Build Back Better agenda.

“We are committed to supporting a deeper and more strategic bilateral partnership between the UK and Nigeria that is based on enhancing economic development, job creation, inclusion, trade and investment,” O’Donohoe further remarked.

In a glowing tribute and commendation to the group, British High Commissioner to Nigeria, Catriona Laing CBE said CDC has been pivotal to creating jobs and supporting the growth of businesses by investing in the poorest countries across Africa, including Nigeria.

“CDC’s commitment to the country signals to other UK investors that investing in Nigeria is possible and should be prioritized in order to help Nigeria and indeed, Africa, mitigate the impact of COVID-19,” the envoy said.

Continue Reading
ikeja electric
FCMB ads
Fidelity ads
first bank
deals book
financial calculator
deals book