Nigeria’s central bank pressures lenders with loan requirement increase

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LAGOS, Oct 2 – Nigeria’s central bank has increased its target for lending by commercial banks for the second time in three months, to help boost growth. Banks that miss the target will face higher cash-reserve requirements.

The bank, in a circular dated Sept. 30, ordered lenders to increase their minimum loan-to-deposit ratio to 65% from 60%, which it set in July. It said those who fall short of the new target by December would have to maintain higher cash reserves.

The new lending target takes effect immediately and will be reviewed quarterly, the central bank said.

Economic growth in Nigeria slowed to an annual rate of 1.94% in the three months to the end of June, the second quarter in a row of declines, as the country struggles to shake off the effects of a recession it escaped two years ago.

The bank has been trying to boost credit to businesses and consumers after that recession, but lending has yet to pick up. With growth slow, banks prefer to park cash in risk-free government securities rather than lend to companies and consumers.

The central bank said loans grew by 5.3% to 16.40 trillion as at the end of September, the deadline it earlier set for lenders to boost their minimum loan-to-deposit ratios to 60%.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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