Slowdown in the Expansion of PSCE


Friday, November 06, 2020 / 10:21 AM / By FBNQuest Research / Header Image Credit: Business LIVE


Private-sector credit extension (PSCE) increased by 16.6% y/y in September (see chart). Although the lowest rate of growth since April, it is comfortably ahead of nominal GDP growth, which the authorities will welcome since Nigeria lags its peers by a margin for this metric.


Credit extension/GDP remains below 20%. The trend improvement comes on the back of rises in the CBN's minimum loan-to-deposit ratio for deposit money banks (DMBs). This latest blip, if it proves such, could have arisen because the banks have reached the CBN's threshold of 65%.


The latest figure for lending by DMBs at end-June is N10.9trn short of the total for September in the CBN's broader series, on which our chart is based. We would explain the difference as largely due to the CBN's own increasing credit interventions and lending by the Bank of Industry and the other state-owned development banks.


The series for the DMBs' lending by sector shows healthy increases of N750bn (32.4%) and N630bn (62.1%) over 12 months in loans to manufacturing, the second largest destination of bank credit, and general services respectively. For oil and gas, the leading destination, the rise was 12.6% and explained largely by exchange-rate movements.


The difference between the M2 and M3 measures of money supply consists of CBN bills held by money holding sectors. These would cover bills issued within its open market operations (OMO). The difference at end-September was N2.26trn, compared with N5.99trn at end-December. The decline tallies with the trend of less frequent auctions and lower sales.


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


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Sources: CBN; FBNQuest Capital Research


We see data on lending to government in the same broader series. While the y/y change has been negative for the past two months, the stock has increased by more than 180% in just two years.

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