CBN: Credit To Private Sector Hits N37.13trn

CBN: Credit To Private Sector Hits N37.13trn

…as currency outside banks peaks at N2.78trn

Banks’ credit to the private sector rose by N5.23trillion to N37.13trillion in April 2022 from N31.90trillion in the corresponding period of last year, latest data released by the Central Bank of Nigeria (CBN) shows. 

The analysis of the “MoneyandCredit Statistics” released by the apex bank, further indicates that credit to the private sector increased by N759.17billion to N37.13trillion in April 2022 fromN36.37trillion in the previous month. Similarly, the data shows that net domestic credit rose toN53.69trillion in April from N52.69trillion in the previous month while net credit to government inched up to N16.56trillion in April from N16.32trillion in March.

Further analysis of the data reveals that Currency Outside Banks (COB) stood at N2.78 trillion in April 2022 compared with N2.72 trillion in the preceding month. Analysts attribute the surge in banking credit to the private sector in recent years to the policies that the CBN introduced to encourage deposit money banks to increase lending to the private sector as part of its efforts to boost economic growth. Specifically, the apex bank in July 2019, announced an increase in the required minimum Loan-to-Deposit Ratio (LDR) to 60 percent effective end of September 2019. It later raised the ratio higher to 65 per cent which banks were expected to comply with by the end of December the same year.

Findings show that the LDR policy resulted in total credit to the private sector rising by over N4trillion between March 2020 and December 2021.

In a report it issued in December, one of the global rating agencies, Standard and Poor’s (S&P), predicted that private sector credit in Nigeria would range between 15 and 18 per cent of the country’s Gross Domestic Product (GDP) before 2023. The rating agency estimated that banking sector loan growth would average around 20 per cent through 2023, while the sector’s nonperforming loan (NPL) ratio was expected to increase to seven per cent in 2021, compared with a reported 5.7 per cent in June 2021. It noted that Nigeria’s private sector leverage was low in absolute terms, adding that compared with peers, loan growth would reflect the renewed impetus stemming from banks’ digital transformation and greater focus on retail lending as well as weakening naira. Furthermore, the agency said that household and corporate leverage metrics were among the lowest in Nigeria’s peergroup, stating that banks are largely focused on serving large and established corporates while small and mid size enterprises lending accounted for less than one per cent of total loans in 2020.