Single-Digit Growth in PSCE in July 2021


Thursday, September 02, 2021 / 09:48 AM / FBNQuest Research / Header Image Credit: FBNQuest 


Total lending to the private sector increased by 8.8% y/y in July to NGN32.8trn (USD79.9bn). The momentum is slowing, however. This data series, which is captured in today's chart, covers lending from all sources including the CBN and the state-owned development banks. The reasonable rate of growth in this measure of private-sector credit extension (PSCE) is the result of the pressure by the industry regulator (the CBN) on the industry to expand loan books. There is a long way to go in boosting financial intermediation when we consider the scale of the unbanked informal economy. Nigeria's PSCE/GDP ratio was just 19.8% at end-2020.


Another CBN series in the Quarterly Statistical Bulletin (QSB) shows the allocation of credit by deposit money banks (DMBs). This gives us a total of NGN21.02trn in March 2021, representing a y/y increase of 13.7%. There is therefore a difference approaching NGN12trn with the fuller measure (and a time lag of four months).


Part of the growth in lending by the DMBs is due to the weakness of the currency, which adds to the naira equivalent of the industry's fx-denominated loans. We assume that much of this lending would have been directed to the oil and gas industry.


Part of the noted difference in the two data series can be explained by the loans of four development finance institutions, led by the recapitalized Bank of Industry (BoI). These amounted to a further NGN940bn in aggregate at end-2020. In August the BoI announced that it planned to raise up to EUR750bn from the sale of global bonds. The funds raised will be on-lent to Nigerian companies out to ten years at single-digit rates.


The greater part of the difference can be explained by the execution of the CBN's development finance role. The latest communique from the monetary policy committee from July noted disbursements of NGN760bn uinder the anchor borrowers' programme, NGN920bn under real sector intervention and NGN320bn under the targeted credit facility. We assume that these are disbursements since the onset of COVID-19. They cover three of more than ten CBN lending programmes.


The y/y growth in money supply (M3) has slowed since the start of the year. This measure includes CBN bills held by money holding sectors, and it may well be that the slowdown reflects the reduced issuance of bills in support of the central bank's open market operations (OMO).   


Money and credit indicators (% chg; y/y)

Proshare Nigeria Pvt. Ltd.

Sources: CBN; FBNQuest Capital Research

Proshare Nigeria Pvt. Ltd.

Related News

  1. A Slowdown in Growth in PSCE, Rose by 10.9% in June 2021 to N32.64trn
  2. Double-Digit Growth in PSCE in May 2021
  3. Steady Growth in Private Sector Credit Extension in April 2021
  4. A Further Welcome Advance in PSCE in February 2021
  5. Continuing Double-Digit Growth in PSCE in January 2021
  6. Post-MPC May 2021: Status Quo Justified but Economy Still Shackled
  7. May 2021 Meeting: Another MPC Decision to Wait and See
  8. CBN Communique No. 136 of the MPC Meeting - May 24-25, 2021
  9. MPC Holds All Policy Parameters At the End of May 2021 Meeting
  10. Pre MPC Note: CBN May Hold Parameters Constant Despite Persistent Inflationary Pressures
  11. MPC Slated to Hold its Third Meeting of the Year, Key Parameters to Remain Unchanged
  12. MPC Meeting: The Hawks Likely to Remain in the Minority
  13. Personal Statements By The MPC Members At The 135 MPC Meeting of Mar 22-23, 2021
  14. A Decent Rise in PSCE, Increased by 10.6% YoY to N31.25trn in March 2021


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News