Banks encouraged to start lending
Publish date: 08 July 2019
Issue Number: 831
Diary: IBA Legalbrief Africa
Nigeria is giving its banks a choice: lend more money, or hand it over to the central bank and earn nothing on it. Banks should use at least 60% of their deposits for loans by the end of September, the central bank said and those that don’t will have their cash-reserve requirements increased, meaning they’ll be forced to park more money at the central bank. A report on the Fin24 site notes that Nigeria’s banks are some of the most reluctant lenders in major emerging markets, with an average loan-to-deposit ratio below 60%. That compares with 78% across Africa. Guaranty Trust Bank, the nation’s biggest lender by market value, fell 1.9% in last week's trading, contributing the most to the Nigerian Stock Exchange All Share Index’s decline. In a letter to banks, Ahmad Abdullahi, director of banking supervision, said the decision was taken 'to ramp up growth of the Nigerian economy through investment in the real sector'.