Central Bank of Nigeria (CBN) has tightened up money supply in the Nigerian economy with the reduction of the Loan to Deposit Ratio (LDR). This, according to Punch of May 1, 2024, was announced by Dr Adetona Adedeji, the Ag. Director, Bank Supervision Department in a podcast titled: Loan to Deposit Ratio Adjustment, uploaded to the Banks website. LDR is now reduced to 50% from the previous 65%.
The Bankers' Bank in Nigeria scaled down the percentage of Bank deposits available for loans because of their resolve to arresting the surging inflation in the country.
The apex bank insisted that monetary policies are veritable tools for controlling inflation which is hike in the prices of goods and services due to the circulation of excess money in an economy.
It suffices to say here that Loan to Deposit Ratio is a measure of a bank's liquidity as it concerns the ratio of the bank's loans to their deposits within the same period.
This reduced percentage of the LDR pegged at 50% from the previous 65% has removed some 15% percent from the bank's deposits available for loans. This by implication increases bank's liquidity and takes off money from the volume of money in circulation.
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