CBN begins refund of N500 billion LDR penalties to Banks

The Central Bank of Nigeria (CBN) has started refunding the Deposit Money Banks, part of the N500 billion imposed as additional cash reserve for breaching the regulator’s directive on lending to the real sector of the economy.

According to the report by Bloomberg, the refund made by the CBN was confirmed by Ahmad Abdullahi, the Central Bank’s head of banking supervision.

The Details: It was learnt that the CBN has refunded some of the banks from the N500 billion ($1.4 billion) earlier taken as additional cash reserves. It was learnt that most of the banks recently fined by the Central Bank were refunded after meeting the 60% Loan-to-Deposit (LDR) requirement.

Confirming the development, the Chief Financial Officer of the United Bank for Africa Plc, Ugochukwu Nwaghodoh, disclosed that the Bank was refunded N99.7 billion after increased lending.

Back-Story: As earlier published on Nairametrics, the CBN imposed “penalties” on twelve Nigerian banks for breaching the regulator’s directive on lending to the real sector of the economy. The CBN debited a combined sum of N500 billion from the vault of the banks and will hold the cash at zero percent interest rates.

The following banks couldn’t maintain the LDR and their accounts were purportedly deducted with the following amount;

  • Citibank(N100,743,055, 321)
  • First Bank of Nigeria(N74,668,880,480)
  • FBNQuest Merchant Bank (N2, 697,456,144)
  • First City Monument Bank(FCMB) (N14, 371,064, 742)
  • Guaranty Trust Bank (GT Bank) (N25, 147, 933, 628)
  • Jaiz Bank(N7, 525, 165,552)
  • Keystone Bank(N4, 162, 938, 879)
  • Rand Merchant Bank(N2, 823,177,399)
  • Standard Chartered Bank(N30,027,137,984)
  • SunTrust Bank (N1,703,205,427)
  • United Bank for Africa (UBA) (N99,676,181,916)
  • Zenith Bank (N135,629,337,625).
LDR: Growing the real sector by fiat?
Godwin Emefiele

Nairametrics had reported that the CBN directed banks to maintain a minimum Loan Deposit Ratio (LDR) of 60% by September 30, 2019. The LDR was reviewed upwards from 58.5% to 60% with the banks informed to maintain the LDR till September ending.

The LDR has now been increased as all DMBs are to now attain a minimum LDR of 65% by December 31, 2019.

In the meantime, the development confirmed the clarifications earlier provided by the CBN. Recall, that reactions trailed the earlier deduction, as reports from a section of the media described the deductions as heavy fine on banks.

However, the CBN quickly clarified that the deductions were only proportionate to the levels of default and banks are not losing the money.

Mohammed Abdullahi, disclosed at the end of the recent Bankers’ Committee’s meeting:

“It is wrong to say the deductions are fine because the banks are not losing the money to the CBN. The only implication is (that) the amount debited would not be invested in money market instruments by them. Once the affected banks raise their lending to the deposit threshold, their accounts will automatically be credited.



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