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CBN Cuts Banks’ Loan-to-Deposit Ratio to 50 Percent

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Central Bank of Nigeria (CBN) has issued a new directive to all Deposit Money Banks (DMBs) introducing a reduction in the loan-to-deposit ratio (LDR) to 50 per cent.

CBN Cuts Banks’ Loan-to-Deposit Ratio to 50 Percent

So called LDR refers to the interaction between total loans and total deposits, expressed as a percentage.

The LDR gives an insight into the proportion of assets a bank can create from its liabilities.

This significant policy adjustment, effective immediately, marks a 15%-point decrease from the previous rate.

The change is a strategic move aligning with the CBN’s recent shift towards a more contractionary monetary approach, in sync with heightened Cash Reserve Ratio (CRR) requirements, which have been raised to 45% for DMBs and 14% for merchant banks.

The new directive signed by Dr Adetona S. Adedeji, acting director, Banking Supervision Department of the CBN, and titled ‘RE: Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy’ is a follow-up to a circular released on January 20, 2020.

It underlines the CBN’s ongoing commitment to refining its regulatory framework in response to evolving economic conditions.

With this banks are now required to recalibrate their lending strategies, adhering to the revised LDR of 50%.

This measure is anticipated to influence the banks’ ability to offer credit, particularly impacting large and medium-scale enterprises that are dependent on bank financing for their operations.

 

The circular read:

“The Central Bank of Nigeria’s (CBN) regulatory directive on the above subject dated January 20, 2020, referenced BSD/DIR/GEN/LAB/12/070 refers.

“Following a shift in the Bank’s policy stance towards a more contractionary approach, it is imperative to review the loan-to-deposit ratio (LDR) policy to align with the current monetary tightening by the CBN.

“Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50%, in a similar proportion to the increase in the CRR rate for banks. All DMBs are required to maintain this level and are further advised that average daily figures shall continue to be applied to assess compliance.

“While DMBS are encouraged to maintain strong risk management practices regarding their lending operations, the CBN shall continue to monitor compliance, review market developments, and make alterations in the LDR as it deems appropriate.”


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E-Financial

CBN Says OPay, Moniepoint, Others can Start Onboarding New Customers Soon

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Central Bank of Nigeria (CBN) has said that mobile money operators including fintech firms like OPay, Palmpay, Kuda Bank, and Moniepoint will resume the enrolment of new customers “in another couple of months”.

CBN Says OPay, Moniepoint, Others can Start Onboarding New Customers Soon

Olayemi Cardoso, governor, stated this on Tuesday at the 295th Monetary Policy Committee (MPC) of the apex bank in Abuja when the MPC jacked up interest rate from 24.75 per cent to 26. 25 per cent.

Cardoso, said the apex bank has engaged many of the players on the need to strengthen their operations.

He said to block money laundering and illicit flows, the apex bank brought up “remedial measures that will help that sector to tighten up on onboarding and even existing clientele base”.

“I am confident that as time goes on, and hopefully in another couple of months, all these will be something of the past and then you will see that sector going back into what they’ve been known to do before, but certainly with a very stronger regulatory framework,” he said.

In April, the apex bank stopped fintech companies from onboarding new customers, a move that has been seen as a clampdown on the financial sub-sector by the Cardoso-led CBN.

When asked why the apex bank took the decision, the CBN chief said reports that the CBN has decided to clamp down on fintech firms are “furthest from the truth”.

He said “the fintechs have not been singled out for any exceptional kind of treatment”, adding that the CBN remained proud of the exploits of fintech firms in the last number of year and the apex bank would continue to support and strengthen them.

“However, regulation is very critical in a sector that seems to have grown so incredibly rapidly,” Cardoso said, citing illicit flows within the sub-sector.

“More recently, we had course to take a deep dive look at the whole issue of illicit flows and money laundering particularly within the non-heavy regulated banking system and we all know some of the issues that came out with cryptos and some of the messages we put out after that, which of course, gave us some course to know that there is the need for heightened surveillance.”

He said the apex bank has had major handshake with security agencies to identify the places to tighten regulations and surveillance in the sub-sector.

Cardoso said, “For that reason, we were concerned with respect to how we saw the issue of anti-money laundering and illicit flows as they made their way within the various sub-sectors of the financial industry and we felt there was a need for us to take a breather and work with different players to strengthen regulations, not by any means to throw them out of business.

“Let me re-emphasise that as at this point in time, we have not revoked the licenses of any of the fintech organisations.”


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Flutterwave Refutes N11Bn Loss Due to Security Breach

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Flutterwave, African fintech company, has debunked allegations in the media that it lost N11 billion ($7.25 million) due to a security compromise.

Flutterwave Refutes N11Bn Loss Due to Security Breach

Flutterwave, led by Olugbenga Agboola, Nigerian tech millionaire has rejected accusations is the only Africa-focused Company to make CNBC’s 2024 Disruptor 50 List

In response to the avalanche of claims, Flutterwave said that it discovered suspicious activity on one of its customer platforms in April 2024. The corporation maintains that it aggressively prevented any loss of customer monies.

As a security precaution, Flutterwave will contact select customers to move their accounts and recommends that all customers implement multifactor authentication, 3D security, and IP whitelisting.

This recent incident raises security worries for the corporation, which accepts payments in over 30 currencies from 40 countries.

In March 2023, reports arose saying hackers stole N2.9 billion ($6.3 million) from Flutterwave. The corporation quickly rejected the charges, reaffirming its commitment to client fund protection.

Flutterwave was ordered by a Nigerian court to recover N19 billion ($12.5 million) for unlawful POS transactions that affected 6,000 accounts across 35 banks and financial institutions.

This came after a months-long inquiry into a technical malfunction that enabled the fraudulent transfers.

Agboola founded Flutterwave in 2016, and it has since been a forerunner in Africa’s ongoing payments revolution. The company, with headquarters in San Francisco and

Lagos, is a notable success story in the continent’s developing fintech sector.

Flutterwave entered the Rwandan and Egyptian markets in 2023, which was a golden year for expansion. It formed a strategic relationship with IndusInd Bank Ltd., a top Indian financial services provider.

The corporation announced a $50 million investment in the Kenyan market to secure an operating license.

These results highlight Flutterwave’s twin goals of transforming Africa’s payments ecosystem and developing a foothold in international markets.

In 2023, Flutterwave formed a strategic relationship with Microsoft, founded by Bill Gates and Paul Allen, American billionaires.

This effort intends to empower at least 10 million small and medium-sized firms (SMEs) across Africa, with a concentration on Nigeria.

The partnership harnesses the power of the fintech sector to boost economic growth and improve people’s lives by promoting financial inclusion.

This collaboration expands on the two companies’ current technological arrangement, which was signed earlier in 2023.


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E-Financial

CBN raises interest rate to 26.25%

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Monetary policy committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 24.75 percent to 26.25 percent.

This comes after Nigeria’s inflation rate rose to 33.69 percent amid the surge in food prices.

Olayemi Cardoso, CBN’s governor, announced the monetary policy rate adjustment at a news conference on Tuesday, May 21, during the committee’s 295th meeting in Abuja.

The monetary policy rate (MPR) is the baseline interest rate in an economy, which banks use to set their interest rates.

This is the third consecutive time the apex bank will be raising the benchmark rate this year. At the March MPC meeting, the benchmark rate had been increased by 200 basis points from 22.75 per cent to 24.75 per cent.


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