The global rank agency, Fitch, states the current condition for Nigerian banks to have a loan to deposit ratio (LDR) of at least 60 per cent at end-September is credit-negative for the sector.
Fitch, in a report released Friday morning, states the new directive would push some banks to significantly improve lending to riskier borrowers, possibly with looser underwriting or underpricing of risk.
According to Fitch, the new LDR requirement in such a short timescale would be very difficult for some banks given their lending levels, particularly if customer deposits continue to grow at present rates.
CBN’s data show that the sector’s overall LDR was 57 per cent at end-May.
“This is low relative to many markets, and reflects banks’ concern about the risk to asset quality from Nigeria’s often volatile operating environment,” Fitch said.
Nigeria’s largest banks, with the exception of Access Bank, have LDRs below or close to 60 per cent and will be among the most affected by the new requirement.
