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CBN pegs lending rate for banks, other financial institutions

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The Central Bank of Nigeria (CBN) has set lending limits for banks and other financial institutions under its regulation to reduce their exposure to risks.

The bank disclosed this in its guidelines to microfinance banks, Deposit Money Banks, mortgage refinance companies, finance companies, and Development Finance Companies on Friday.

On the lending limits to the microfinance banks, it said, “The maximum loan to any individual borrower shall not exceed one per cent while a loan to group of borrowers, a cooperative or a corporate body shall not exceed five per cent of the MFB’s shareholders’ fund unimpaired by losses or as may be prescribed by the CBN.”

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It stated that aggregate insider-related lending must not exceed five per cent of an MFB’s shareholders’ fund unimpaired by losses.

The CBN also said the total outstanding exposure by a DMB to any single person or a group of related borrowers must not at any point in time exceed 20 per cent of the bank’s shareholders’ fund unimpaired by losses.

It stated, “Fifty per cent of a bank’s off-balance sheet engagements shall be applied in determining the bank’s statutory limit to a single obligor.”

It added that the total outstanding exposure (on and off-balance sheet) by a bank to all tiers of government and their agencies must not at any point in time exceed 10 per cent of the total credit portfolio.

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