CBN’s Directive On LDR Will Stimulate Growth Of Real Sector Economy With N1. 5 Trillion Credit -NECA

Nigeria Employers’ Consultative Association NECA has commended the Central Bank of Nigeria CBN, over it directive to commercial banks to maintain a minimum Loan Deposit Ratio, LDR, of 60 per cent.

The Director-General of NECA, Timothy Olawale said the directive will make over N1.5 trillion additional money available as credits to the real sector of the economy which according to him will stimulate growth.

Though Olawale expressed concern over improving the flow of needed credit to private sector, he described some of the methods adopted to achieve this objective as unorthodox.

He said, “Forcing the banks to lend under the current macro-economic situation will only result in a likely build-up of non-performing loans in the medium to long term, given the sluggish growth in the economy and the high risk in the operating environment. This could pose a risk to financial stability,”

The interest rate charged on loan by financial institutions has also been described as   worrisome for businesses, by worrisome. .

He said, “With the volatility of the Nigerian economy and the unpredictable regulatory environment, the risk of a double digit interest rate could be too high for businesses, especially the Small and Medium Enterprises that are supposed to also be beneficiaries of the directive.”

While commending the CBN for given the directive, Olawale, urged the CBN to do more than give directives but also ensure the effective implementation and monitoring of the directive.

 “More deliberate efforts should be made to ensure a hospitable business environment that will make lending attractive and borrowing by the real sector even more attractive.”

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