By Aduragbemi Omiyale
One of the things that help the economy of any nation is the provision of credit facilities to the different sectors and for many years, it has been one issue.
This was why the Central Bank of Nigeria (CBN) when worried that financial institutions were not carrying out their core function of lending to entrepreneurs, it mandated banks operating in the country to ensure their loan to deposit (LDR) is not below 65 per cent.
This was contained in a circular, BSD/DIR/GEN/LAB/12/070, to banks dated January 7, 2020, on the regulatory measures to improve lending to the real sector of the Nigerian economy.
Since the issuance of the regulatory directive and in line with its key strategic objective of driving economic growth in Nigeria, Stanbic IBTC Bank has increasingly focused on the growth of its credit exposures to the real sector of the economy.
The focus and concerted efforts of the bank’s management to ensure compliance with the regulatory directive of improving lending to the real sector of the Nigerian economy have been responsible for the growth in the risk asset portfolio for Stanbic IBTC Bank over the last two years.
The loan book increased by 18 per cent from FY 2019 position of N556.4 billion to N655.3 billion as at December 31, 2020.
The bank also recorded an increased loan growth by 30 per cent from the December 31, 2020 position to a gross risk asset position of N854.9 billion recorded as at September 30, 2021.
It is important to note that the risk asset growth of 18 per cent and 30 per cent recorded by the bank in FY 2020 and as at Q3:2021 remain significantly higher than the industry average growth of 18 per cent and 8 per cent in FY 2020 and as at Q3:2021, respectively.
Consequent upon the significant growth recorded in the bank’s risk asset growth in 2020 and YTD 2021, the bank has remained compliant with the CBN’s daily minimum LDR requirement of 65 per cent with an FY 2020 daily LDR average of 65.84 per cent and 2021 YTD daily average of 69.86 per cent.
It is important to note that the bank suffered no CRR debits by the CBN for non-compliance with the regulatory LDR directive over the period.
For the good record, it is also noted that the growth in the bank’s Cash Reserve Requirement (CRR) position from N369.0 billion as at December 31, 2020, to N462.6 billion as at September 30, 2021, has been largely on account of the monetary policy actions introduced by the CBN to rein in inflationary and exchange rate pressures in the economy.
In line with its price stability and monetary policy mandates, the CBN is saddled with the responsibility of managing surplus liquidity in the system and at various times over the period, the CBN has introduced special CRR debits to sterilize surplus market liquidity.
These special CRR debits which are over and above the minimum regulatory cash reserving requirement of 27.5 per cent of customer deposit growth have indeed been responsible for the growth in Stanbic IBTC Bank’s total and effective CRR positions which stood at N462.6 billion and 60.09 per cent respectively as at September 30, 2021.
Notwithstanding the financial constraints arising from the sterilized liquidity from the CBN, Stanbic IBTC Bank remains very liquid and adequately capitalized with liquidity ratio and capital adequacy ratio standing at 96.2 per cent and 15.7 per cent respectively as at September 30, 2021, and above the regulatory minimum of 30 per cent for liquidity ratio and 8 per cent for capital adequacy ratio.
