Nigeria: Lending to the Real Sector

2 September 2019
opinion

Pelumi Joseph writes that without a detailed identification database, credit cannot be extended to deserving individuals

The Central Bank of Nigeria (CBN) issued a circular in July, titled "Regulatory measures to improve lending to the real sector of the Nigerian economy". The key take out from the circular is to ensure that all banks have a minimum Loan to Deposit Ratio (LDR) of 60% by September 2019. At face value, the directive appears to seek to ramp up credit growth - which has been negative over the past 18 months - thus exacerbating the after-effects of the recession and keeping economic growth muted. However, upon closer review, not much has changed, though this is a step in the right direction. The timeliness of the directive is to be commended, as well as its implications for economic growth and more importantly, for SMEs, who are at the heart of economic activity.

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