Nigeria threaten sanctions on banks that fail to meet higher loan rule


    By Annmarie Hordern and Ruth Olurounbi

    Central Bank chief Emefiele says compliance “excellent” so far
    Banks that fail to meet higher loan rule to be penalized

    Central Bank of Nigeria Governor Godwin Emefiele said most of the country’s banks have obeyed a directive to raise loan-to-deposit ratio to 60% and those that fail to do so will face penalties by Oct. 1.

    “Compliance level has been excellent,” Emefiele said in an interview with Bloomberg TV in London on Tuesday. “Not all the banks have complied, naturally. Sanctions will be administered by Oct 1.”

    The central bank ordered banks to increase lending by late September in a bid to shore up an economy struggling to recover from a contraction in 2016, its first in a quarter of a century. The monetary authority wants to steer banks away from naira bonds, which offer hefty yields, and into consumer and corporate lending.

    Some lenders have warned that extending more credit amid double-digit inflation could jeopardize the health of the banking system.

    S&P Global Ratings warned last week that the directive is unlikely to unlock credit, unless the government addresses other structural bottlenecks to investment in Africa’s most populous country.

    — With assistance by Elisha Bala-Gbogbo, and Alonso Soto
    (Adds S&P comments in last paragraph.)

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