Zenith Bank addresses impacts of CBN’s Loan-to-deposit ratio policy

GMD/CEO of Zenith Bank Plc, Ebenezer Onyeagwu, says the Central Bank of Nigeria’s loan-to-deposit policy is a welcome development that will not have any negative effects on the banking sector.

While the policy wouldn’t take effect until September 2019, many would have thought the CBN directive would be disturbing to banks, but for Zenith’s Onyeagwu, it’s a welcome development for the country as a whole.

The loan-to-deposit ratio policy of the CBN is in line with the demand of Nigerians who have frequently complained of banks’ refusal to loan out their deposits.

Speaking during his introductory visit to the Nigerian Stock Exchange (NSE), Onyeagwu said the 60% lending of deposits wouldn’t impact negatively on the banking sector, rather, it would favour banks who are effective credit risk managers.

He also stated that the increment in loan-level would help build Nigeria’s economy as Small and Medium Enterprises (SMEs) and the retail sector would have more access to credit facility that would enable their growth and expansion. According to PriceWaterhouseCoopers, SMEs contribute 48% of national GDP, account for 96% of businesses and 84% of employment in Nigeria.

According to Onyeagwu, banks were strict on offering loan in the past because of debtors’ act of evading servicing their debt. He said the attitude of borrowers had been unpleasant and was as an obstacle to lending by banks.

“The capability that will enable us to enforce very effective and tight credit control such that if a customer takes a loan from Bank A and abandons it and goes to Bank B to open an account, with the BVN, such a customer can be traced. If the customer is owning Bank A N1 million and go to Bank B to open an account and deposit N2 million, electronically, the system will recover the money from the debtor. We believe this will help drive decent behaviour and promote good credit borrowers.”