INTRODUCTION
On 18th April, 2024, the Central Bank of Nigeria (“CBN”) issued a circular (“the Circular”) (BSD/DIR/PUB/LAB/017/005) to review regulatory measures aimed at improving lending to the real sector of the economy. The circular directed all Deposit Money Banks (DMBs) to reduce their loan-to-deposit ratio (LDR) from 65% to 50%, effective immediately. This
represents a 15% decrease from the previous LDR rate. The loan-to-deposit ratio assesses a bank’s liquidity by comparing its total loans to its total deposits for the same period. To calculate the loan-to deposit ratio, you divide a bank’s total loan amount by the total amount of deposits for the same period.