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CBN to increase LDR to 70%

The Central Bank of Nigeria (@cenbank) is reportedly set to increase banks’ Loan to Deposit Ratio (LDR) to 70%, from the current 65% recently implemented by the bank.

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The Central Bank of Nigeria (CBN) is reportedly set to increase banks’ Loan to Deposit Ratio (LDR) to 70% by 2020.

According to a report published on Vanguard, the disclosure was made by CBN Director, Banking Supervision, Mr Hassan Belllo while speaking at the 2019 workshop for Finance Correspondents and Business Editors, organised by the Nigeria Deposit Insurance Corporation (NDIC) in Yola, Adamawa State.

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According to Bello, the introduction of the LDR has enhanced credit into the economy. Hence, the CBN would move the LDR to 70%.

Recall that in October, the CBN issued a fresh circular mandating commercial banks operating in the country to lend out up to 65% of their customer deposits from the initial 60%.

The CBN forcing banks to lend: In an earlier 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.

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  • Three months later, the CBN issued another circular addressed to all banks, raising the LDR target for all Deposit Money Banks (DMBs) from the initial 60% to 65%.
  • According to the information contained in the circular, the major reason for the newly revised LDR was the noticeable “growth in the level of the industry gross credit”.
  • Following this, the CBN set December 31st as the ultimatum for banks to comply with the new 65% LDR.

Already, criticisms have trailed the current 65% LDR ratio, as experts have argued that it might increase the level of non-performing loans in the economy.

Speaking recently, the Chief Executive Officer, Financial Derivatives Company Limited (FDC), Mr Bismarck Rewane, stated that lenders would “struggle” in their bid to comply with the directive.

Rewane stated, “The banks have not opened the credit spigot and borrowers cannot wait to draw down the loans on the one hand.

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“On the other hand, investors and savers are looking desperately for alternative asset classes. This is reducing the marginal propensity to save whilst increasing the marginal propensity to consume and import.

“The prognosis is that either we see a surge in credit and growth or we witness outflows from the system. In all cases, the financial sector is in for an effervescent year-end for 2019 and an interesting 2020.”

Speaking to Nairametrics, Financial expert and CEO, AfriSwiss Capital Assets Management Limited, Kalu Aja, stated, “The real headwind in the economy for banks is the CBN’s push to get banks to lend to the real sector, this may push the banking sectors to create risk assets but expose loan portfolio to more provisioning.”

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IMF cautions CBN: Similarly, the International Monetary Fund (IMF) has disclosed that the balance sheets of banks would be weak due to the directive from the Central Bank of Nigeria that deposit money banks should achieve a 65% LDR.

The global firm argued in its Regional Economic Outlook for sub-Saharan Africa report that the development would significantly weaken banks’ balance sheets and lower the cost of funds.

Despite the IMF’s warning, the Central Bank has indicated it has no plan to reduce the LDR, but may rather increase it. According to the CBN governor, Godwin Emefiele, while reading the communique of the last Monetary Policy Committee meeting, the 65% LDR policy action has yielded positive actions.

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“The MPC noted with pleasure, the positive outcome of actions already taken by the Bank. These actions include the current policy on loan-to-deposit ratio, which has resulted in loans and advances rising by over N1.1trillion between June to October 2019.

“It further noted that these actions have assisted in boosting credit to the agricultural and manufacturing sectors, hence, the positive outcome on the GDP. The MPC is hopeful that the LDR initiative must be sustained as interest rates being paid by borrowers have so far dropped by up to 400 basis points between June and October 2019. These have happened with the corresponding decline in NPLs to 6.5% at the end of October 2019.”

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While the CBN is yet to release an official statement to this effect, this means the reported plan by the apex bank to increase the LDR to 70% is coming as the deadline for the recent increase approaches.

Patricia

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

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Financial Services

NEXIM Bank issues rebuttal following explosive N50 billion fraud allegation

NEXIM Bank was established in 1991 and is devoted to diversifying Nigeria’s non-oil export base.

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Nexim Bank

Following numerous claims accusing Abba Bello, the Managing Director of Nigerian Export-Import Bank (NEXIM Bank) of diverting the whopping sum of N50 billion, the organisation finally issued a rebuttal yesterday in an attempt to clear its name.

A detailed statement that was signed by NEXIM Bank’s Corporate Communications Department described the accusations as false. The statement also noted that ‘a faceless organisation’ known as Citizens Committee for Corruption Free Nigeria (CCCN) had been the one behind the fraud claims.

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The statement further noted that Nexim Bank initially ignored the accusations, but felt the need to respond after those leveling accusations against the organisation showed no sign of stopping.

READ MORE: NEXIM Bank set to disburse ₦25bn loan to non-oil exporters

The intrigues: In an obvious attempt to absolve the Abba Bello-led management of these fraud allegations, the statement had attacked NEXIM Bank’s immediate past management team. The erstwhile management was dissolved in 2017 by President Muhammadu Buhari due to gross incompetence. Apparently, Abba Bello was brought on board to help rescue Nexim Bank from its huge non-performing loan problem which was worsened by what the statement described as “reckless abuse of process” which led to insider related loans and an absolute breakdown of professionalism in bank’s loan administration processes.

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The statement then praised Bello for successfully re-tooling NEXIM Bank and bringing it back from the brink of failure within the 3-year period he had been in charge. The statement also noted that NEXIM Bank reported profits of N2.03 billion and N1.09 billion in full-year 2019 and 2018 respectively, as against losses of N569 million and N8.03 billion in 2017 and 2016, respectively.

“We have noted recent incessant attacks on the Nigerian Export-Import Bank (NEXIM Bank) and its management in a section of the media, predominantly the social media. Most recently, a report has been trending on the social media claiming that a petition has been forwarded to the Economic and Financial Crimes Commission (EFCC), calling for a probe of the Managing Director/Chief Executive of Nexim Bank, Mr Abba Bello, over alleged corruption and mismanagement of the N50 billion Rediscounting and Refinancing Facility (RRF), provided by the Federal Government…

READ MORE: Buhari orders probe of past administrations over $9 billion U.K judgment

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“The current management of the bank, led by Mr Abba Bello, resumed office in April 2017 to replace the erstwhile government, which was removed by President Muhammadu Buhari, GCFR, over issues relating to gross incompetence, which had made the bank almost insolvent, with huge non-performing loans, exacerbated by reckless abuse of process, insider related loans and lack of professionalism in loans administration, amongst other issues,” some parts of the statement said.

More details: Citizens Committee for Corruption Free Nigeria (CCCN) had started a petition with the Economic and Financial Crimes Commission (EFCC), calling for Bello’s probe over the alleged diversion of N50 billion from Nexim Bank’s coffers. Specifically, the petition had accused Abba Bello of diverting and mismanaging the N50 billion Rediscounting and Refinancing Facility which was availed by the Federal Government to assist commercial and merchant banks to provide short-term finance in support of exports.

NEXIM Bank also clarified on the N50 billion Rediscounting and Refinancing Facility, noting that the money has been used to fund about 60 projects since it was released by the Federal Government in 2018. The bank said the track records of the fund’s beneficiaries are verifiable, and that the loans were adequately secured.

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Note that NEXIM Bank was established in 1991 and is devoted to diversifying Nigeria’s non-oil export base through the provision of adequate financing.

Patricia
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Tech News

Gokada Founder, Fahim Saleh murdered in New York apartment

Mr. Fahim Saleh’s body was found decapitated and dismembered with an electric saw.

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Gokada Founder Fahim Saleh murdered in New York apartment

Fahim Saleh, the entrepreneur who founded Gokada, has been murdered in his luxury New York City apartment, according to the New York Times.

Police detectives in New York disclosed that Mr Saleh’s body was found decapitated and dismembered with an electric saw. His head, limbs, and torso were said to have been found in different parts of the apartment after whoever murdered him tried to clean up the crime scene.

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The police also revealed that plastic bags were found on the scene of the murder, which they say could have been an effort to “clean up” evidence of the murder.

The casualty was identified as 33 years old, Fahim Saleh, tech entrepreneur and Gokada founder who owned the apartment. His body was found by his sister, 3:30 pm New York time after she went to check on him after not hearing from him in 24 hours, calling the police immediately after finding the body.

Police also believe his sister’s arrival may have interrupted the evidence clean up, as the electric saw was still plugged in. Police are investigating it as a case of homicide.

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READ MORE: Bike-hailing firms in talks with Lagos State to resume operations

Surveillance video showed Mr. Saleh entering the elevator with someone else in a black mask and suit, the person also follows Saleh as he enters his apartment, and a fight began between the two. Police say there is a second exit through a service entrance in the apartment.

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Fahim Saleh was born in Saudi Arabia to Bangladeshi parents before settling in New York with his family and started coding as a teenager. He founded PrankDial after graduating from Bentley University where he recorded his first success in tech.

READ ALSO: Gokada returns amidst price war, market expansion and government regulations 

He founded the bike hailing company Gokada, which began operations in Lagos 2 years ago. Gokada has raised $12.4 million according to Startup listing site Crunchbase. During their venture capital raise of $5.3 million in 2019, Saleh announced plans to expand Gokada services into a club with restaurants, letting drivers relax and get things they need from a  Gokada shop such as food.

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Gokada had to reduce operations in Lagos after the February Okada ban. The Lagos Sate Government had banned okada services in Apapa LGA, Apapa Iganmu LCDA, Lagos Mainland LGA, Yaba LCDA, Surulere LGA, Itire-Ikate LCDA, Coker-Aguda LCDA,  Ikeja LGA, Onigbongbo LCDA, Ojodu LCDA, Eti-Osa LGA, Ikoyi-Obalende LCDA, Iru-Victoria Island LCDA, Lagos Island LGA and Lagos Island East LCDA.

Patricia
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Coronavirus

Moderna’s shares gain over 16% as COVID-19 vaccine passes first human trial

Participants received two doses of the potential vaccine.

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Moderna COVID-19 vaccine passes safety test on animals

Moderna’s share price gained over 16% on Tuesday after the U.S drugmaker disclosed that its potential vaccine in containing the COVID-19 virus had produced a “robust” immune response in all the 45 patients in its first phase of the human trial, according to data released yesterday night in the peer-reviewed New England Journal of Medicine.

In a report credited to CNBC, about 45 patients produced neutralizing antibodies, which scientists believe is important for building immunity. It also provided more promising data that the vaccine may give some protection against the coronavirus. In the trial, each participant received a 25, 100 or 250 microgram dose, with 15 people in each dose group. Participants received two doses of the potential vaccine.

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READ ALSO: Remdesivir has received FDA’s emergency approval to treat COVID-19, according to Trump

“After two vaccinations, the COVID-19 vaccine generated a “robust” immune response in all participants in all dose cohorts,” Moderna said. The company also disclosed that the levels of neutralizing antibodies in patients in the high dose group were fourfold higher than in recovered COVID-19 patients.

“These Phase 1 data demonstrate that vaccination with mRNA-1273 elicits a robust immune response across all dose levels and clearly support the choice of 100 µg in a prime and boost regimen as the optimal dose for the Phase 3 study,” Moderna’s chief medical officer, Tal Zaks, said in a statement. “We look forward to beginning our Phase 3 study of mRNA-1273 this month to demonstrate our vaccine’s ability to significantly reduce the risk of COVID-19 disease.”

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Quick fact about COVID-19: Although for some individuals, the COVID-19 virus causes only mild illness, it can make other individuals seriously ill. The disease can be very fatal, especially among older individuals, and those with compromised immunities (such as diabetes, high blood pressure, or heart problems) appear to be more susceptible.

Recall that about a month ago, Nairametrics reported news of a series of tests carried on laboratory mice with Moderna Inc’s COVID-19 vaccine showing hope that it might not increase the risk of more serious diseases and that one dose might provide protection against the COVID-19 virus.

Moderna also disclosed that the COVID-19 vaccine was generally well-tolerated, though more than half of the participants reported mild or moderate symptoms such as fatigue, muscle aches, or pain at the injection site.

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Patricia
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