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Nigeria Sees Most Banks Raising Lending to Meet New Ratio

Nigeria Sees Most Banks Raising Lending to Meet New Ratio

(Bloomberg) --

Central Bank of Nigeria Governor Godwin Emefiele said most of the country’s banks have obeyed a directive to raise loan-to-deposit ratio to 60% and those that fail to do so will face penalties by Oct. 1.

“Compliance level has been excellent,” Emefiele said in an interview with Bloomberg TV in London on Tuesday. “Not all the banks have complied, naturally. Sanctions will be administered by Oct 1.”

The central bank ordered banks to increase lending by late September in a bid to shore up an economy struggling to recover from a contraction in 2016, its first in a quarter of a century. The monetary authority wants to steer banks away from naira bonds, which offer hefty yields, and into consumer and corporate lending.

Some lenders have warned that extending more credit amid double-digit inflation could jeopardize the health of the banking system.

S&P Global Ratings warned last week that the directive is unlikely to unlock credit, unless the government addresses other structural bottlenecks to investment in Africa’s most populous country.

--With assistance from Elisha Bala-Gbogbo and Alonso Soto.

To contact the reporters on this story: Annmarie Hordern in London at ahordern1@bloomberg.net;Ruth Olurounbi in Abuja at rolurounbi4@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Dulue Mbachu, Yinka Ibukun

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