Connect with us
nairametrics

Business News

CBN increases LDR to 65%, sets December deadline 

The CBN has issued a fresh circular mandating commercial banks operating in the country to lend out up to 65% of their customer deposits.

Published

on

CBN, Key lending rate, CBN to boost creative industry with N22 billion , CBN increases LDR to 65%, sets December deadline, External reserves drop by $3.2 billion in Q3’19 , Banks' loans to Oil and Gas, Power, other sectors drop by N411.8 billion 

The Central Bank of Nigeria (CBN) has issued a fresh circular mandating commercial banks operating in the country to lend out up to 65% of their customer deposits. 

In a new circular addressed to all banks obtained by Nairametrics, the CBN disclosed that the minimum Loan to Deposit Ratio (LDR) target for all Deposit Money Banks (DMBs) has been reviewed upward from the initial 60% to 65%.  

[READ MORE: CBN to boost creative industry with N22 billion]

A new LDR: According to the information contained in the circular titled: ‘Regulatory measures to improve lending to the real sector of the Nigerian economy’, the major reason cited by the CBN for the newly revised LDR is the noticeable “growth in the level of the industry gross credit”. 

  • For instance, the apex bank stated that the industry gross credit increased by N829.4 billion or 5.33% from 15.5 trillion at the end of May 2019 to N16.3 trillion as at September 26, 2019. 
  • The CBN, therefore, disclosed that the LDR was reviewed upward in line with provisions of the earlier circular and in order to sustain the momentum.

The Deadline:  Also, the CBN has set a new date as the ultimatum for banks to comply with the new 65% LDR. Recall the initial target set by the apex bank was September 30th, however, it stated that all DMBs are to now attain a minimum LDR of 65% by December 31 2019. 

GTBank 728 x 90
  • According to the circular, to encourage SMEs, Retail, Mortgage and Consumer Lending, these sectors shall be assigned a weight of 150% in computing the LDR for this purpose. 
  • It was further disclosed that failure to meet the new minimum LDR by December 31st shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall implied by the target LDR.  

The CBN also stated it shall continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy whilst promoting a safe, sound and resilient financial system.   

A quick checkIn an article published on Nairametrics in July, the CBN, through a circular, mandated commercial banks operating in the country to lend out up to 60% of their customer deposits. 

  • Nairametrics also stated that with the new policy, anyone could get a loan at this rate. 
  • At the same time, Non-Performing Loans stood at N1.69 trillion as of March 2019. 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.
  • However, the latest banking sector data released by the Nigerian Bureau of Statistics (NBS) shows that Non-Performing Loans dropped to a 4-year low in June 2019 (N1.44 trillion). Also, credit to the private sector rose to N15.4 trillion.  

Experts have raised concerns that initial 60% LDR would expose banks and skyrocket the Non-Performing Loans. Despite this, the CBN has revised LDR to 65% and banks are expected to brace up.  

Coronation ads

[READ ALSO: CBN Cashless Policy: Reps eye reversal]

Following the latest development, while companies and businesses with strong cash flows and collateral will have significantly higher chances of obtaining loans, banks will also have to invest heavily on strategies that can help mitigate against lending risk 

 

 

Jaiz bank ads

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

Click to comment

Leave a Reply

Your email address will not be published.

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

Companies

Abbey Mortgage Bank Plc projects N60.13 million profit in Q1 2021

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

Published

on

Abbey Mortgage Bank announce the appointment of substantive Managing Director, and 5 Directors.

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

According to the earnings forecast issued by the bank and seen by Nairametrics, it projected the 134.7% Q-o-Q rise from a loss of N173.49 million recorded in its most audited financial statement for Q3, 2020.

key highlights of its earnings forecast for Q1 2021 when compared with Q3 2020 figures include;

  • Pre-tax profit increased to N88.4 million, +151.5% Q-o-Q.
  • Interest income increased to approximately N515.9 million, +55.45% Q-o-Q.
  • Net operating income increased to N421.94 million, +79.9% Q-o-Q.
  • Interest expense increased to N208.06 million, +63.95% Q-o-Q.
  • Operating expenses declined to N333.52 million, -17.9% Q-o-Q.
  • Credit loss expense increased to N19.83 million, +100% Q-o-Q
  • Gross earnings of N649.83 million
  • Taxation of N28.3 million
  • Other income of N133.84 million.

Bottom line

Despite recording not too impressive results in its last financial statements, the firm is, however, optimistic going for Q1 2021 as reflected in its forecast.

This optimism might be premised on the news of a positive general economy by Q1 2021, which will trickle down to various sub-sectors of the economy.

GTBank 728 x 90

Continue Reading

Economy & Politics

Nigeria needs $3trillion in 30 years to reduce infrastructure deficit – Osinbajo

Vice President Yemi Osinbajo has stated that Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

Published

on

Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

The Vice President, Yemi Osinbajo has said Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

He disclosed this while featuring at a webinar organized by the Bureau of Public Enterprises (BPE).

Osinbajo told the webinar that Nigeria needs to adopt new models of investments for infrastructural developments because relying on public expenditure alone is not sustainable.

READ: How digital transformation will impact Nigeria’s projected $8.79 billion economic expansion

The seminar discussed the roles of Public-Private Partnership (PPP) in developing Nigerian infrastructure. The Vice President said Nigeria still face a huge infrastructural deficit, despite government investment which is a roadblock to rapid economic growth.

GTBank 728 x 90

The Federal Government recognizes this fact, which is why we are considering other approaches to complement and boost financing for the development and maintenance of infrastructure in Nigeria.

READ: Nigeria’s Broadband subscriptions peak at 82.7m – Prof. Danbatta

“It is clear that this deficit can only be made up by private investment. Private sector is 92 per cent of GDP, while the public sector is mere 8 per cent. So, the synergy between the public and private sector through Public-Private Partnerships (PPP) is really the realistic solution.

Coronation ads

“The fact that only N2.49 trillion was appropriated for capital expenditure in 2020, reflects the importance of deliberate and pragmatic action to boost infrastructural spending.

READ: #EndSARS: Infrastructure and Works, Education, 3 others are prioritised in Lagos’ 2021 budget

“It seems to me to be quite clear that the financial outlay and management capability required for infrastructural development and service delivery outstrip the financial and technical resources available to government.

“In other words, the traditional method of building infrastructure through budgetary allocations is inadequate and set to become harder because of increasingly limited fiscal space,” he said.

READ: FEC okays FMBN’s request to purchase banking application software for N487.39 million

Jaiz bank ads

He revealed that the FG has launched a series of PPP’s to enable Nigeria meet its infrastructure deficit needs, citing the roles of agencies like the BPE with PPP’s.

Stanbic IBTC

The Federal Government has recently issued a circular on the administration of PPP projects in the country to provide the much-needed clarity.

READ: AfDB to support FERMA with $10 billion for roads, others 

“The circular re-emphasises that the BPE shall be responsible for the concession of public enterprises and infrastructure already listed in the First and Second Schedules of the Public Enterprises Act.

“The circular equally stipulates that the BPE shall act on behalf of the Federal Government, as the counterparty on all infrastructure projects being developed on a PPP basis,” he said.

READ: CBN launches Private Sector-led Accelerated Agriculture Development Scheme

He disclosed that the Infrastructure Concession Regulatory Commission (ICRC) would continue to act as the regulatory agency for PPP transactions, with directives including inspections and monitoring PPP projects.

“It is expected that this new policy direction would provide clarity to stakeholders and foster the improvement of PPP programmes in the country.

“Ministries, Departments and Agencies, as well as the multilateral agencies and our development partners are urged to support the PPP policy objectives and institutional arrangements already put up by government,” he said.

READ: FG says vehicle owners to pay N250,000 to convert from petrol to autogas

app

What you should know 

  • Nairametrics reported last month that Moody Investors Services revealed that Nigeria needs to spend about $3 trillion in over 30 years to bridge the infrastructural gap experienced in the country.
  • The Minister of Works and Housing, Babatunde Raji Fashola, revealed that the Federal Government needs at least N500 billion annually for the next 3 years to develop and fix its 35,000 kilometres road network, as work continues on 13,000 kilometres of the network.
  • Nairametrics also reported last month that the FG approved the establishment of an infrastructure company that will be wholly focused on critical infrastructural investments in the country.

app
Continue Reading

Tech News

Stripe plans corporate banking services for merchants, vendors

Stripe Inc is partnering with American elite banks in offering corporate-banking services to its merchants and vendors.

Published

on

Stripe plans corporate banking services for merchants, vendors

Stripe Inc, one of the most valuable start-ups on this planet, is partnering with American elite banks such as Goldman Sachs Group Inc. and Citigroup Inc. in offering corporate-banking services.

This is as the fast-rising startup, known for simplifying payment, seeks to diversify its business offering, amid a competitive ecosystem that includes PayPal, Visa, Mastercard, Adyen.

READ: MainOne Cable: A decade-old journey to bridging the digital divide in West Africa

What this means

Stripe, best known for handling millions of online businesses and e-commerce web pages, will soon start offering some of its client’s interest yielding bank accounts, debit cards, and other cash-management services, according to a report credited to WSJ.

However, these service offerings listed are for its merchants and vendors that do business with Stripe.

GTBank 728 x 90

READ: Edlyft raises over $1.4 million venture capital during pandemic

  • Recall Nairametrics revealed how Stripe had raised $600 million to invest and acquire payments companies in developing nations. It disclosed that Nigerian startup, Paystack, had been on Stripe’s bucket list for a while since 2018 when Stripe led an $8 million funding round for it.
  •  Stripe acquired Paystack for an undisclosed deal believed to be worth over $200 million, making it the biggest fintech startup acquisition to date to come out of Nigeria, as well as Stripe’s biggest acquisition to date.

READ: America’s biggest food delivery app, DoorDash seeks for IPO approval

Patrick Collison, CEO of Stripe, spoke on the company’s strategy at the time it acquired Paystack. He said:

Coronation ads

“Stripe thinks on a longer time horizon than others, because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050.”

He added that Stripe also planned to understand the ecosystem and keep its eyes open so it would see where help was needed, as the company did not tie up its investments into “complicated strategic investments.”

READ: Kaduna Inland Dry Port woos more partners with better service delivery ahead of 2021

READ: Nigeria owes foreign airlines $53 million as proceeds from ticket sales – IATA

Jaiz bank ads
Continue Reading