Steady Growth in PSCE; Grew by 9.8% YoY in August 2021 to N33.4trn


Wednesday, September 29, 2021 / 09:02 AM / FBNQuest Research / Header Image Credit: FBNQuest 


Total lending to the private sector grew by 9.8% y/y in August to NGN33.4trn (USD81.0bn). The trend rate of growth is slowing, however. The data, which is shared in today's chart for private-sector credit extension (PSCE), covers lending from all sources including the CBN and the state-owned development banks. This measure of credit was growing at a treble-digit level y/y throughout H2 '19 as the CBN twice increased the minimum permitted loans-to-deposits ratio. There is still some distance to travel in terms of financial intermediation and inclusion when we consider the scale of the unbanked informal economy. Nigeria's PSCE/GDP ratio has picked up to 20.1% in Q1 '21 from 19.1% one year earlier. The comparable figure for Kenya from all lenders in Q4 '20 was 27.0%. The CBN plays a much larger role in lending to the real economy than its Kenyan counterpart.


The CBN's Quarterly Statistical Bulletin (QSB) shares another series covering the distribution of credit by deposit money banks (DMBs). It gives a total of NGN21.02trn in March 2021, which leaves a large gap exceeding NGN12trn with the fuller CBN measure. There is also a time lag of five months to explain away the difference.


Another reason is the lending by four development finance institutions, led by the recapitalized Bank of Industry. These totalled NGN940bn in aggregate at end-2020 and will continue to grow strongly within the FGN/CBN agenda of supplying credit where the DMBs are seen as reluctant to tread.


The largest single explanation of the difference between the two measures has to be the delivery of the CBN's development finance role. The latest communique from the monetary policy committee from September listed disbursements of NGN800bn under the anchor borrowers' programme, NGN710bn under the commercial agriculture credit scheme, NGN1trn under real sector intervention and NGN340bn under the targeted credit facility (TCF). The programmes other than the TCF were launched before the pandemic but all have seen an acceleration over the past 18 months. The communique lists smaller sums disbursed by another six CBN schemes.


We have extended our chart to include net credit to government. Its y/y growth has accelerated in the past few months, reflecting a combination of the FGN's expansionary fiscal stance and the regular underperformance of revenue collection relative to budget (Good Morning Nigeria, 22 September '21). Another CBN publication shows a record FGN deficit of NGN2.5trn in Q1'21.


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

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Sources: CBN; FBNQuest Capital Research


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