Wednesday, July 07, 2021 / 11:12
AM / by FBNQuest Research / Header Image Credit: FBNQuest
Total lending to the private sector has increased at a double-digit rate y/y since August '19 although momentum appears to be slowing. It increased by 10.2% y/y in May, to NGN32.20trn (USD78.2bn). 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 healthy growth in this measure of private-sector credit extension (PSCE) is the result of intervention by the industry regulator: the CBN tightened its loans-to-deposits ratio for commercial banks to 60% as at September 2019 and 65% three months later. 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 shows the allocation of credit by deposit money banks (DMBs). This gives us a total of NGN20.37trn at end-2020, and therefore a difference of approaching NGN12trn with the fuller measure.
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. Some estimates put these loans at up to 40% of their total lending.
We understand that Tier One banks are currently guiding to loan book growth over 12 months of up 10%. For the smaller players in the industry, the guidance can run up to 15%.
The monetary policy committee (MPC) regularly supplies updates on the execution of the CBN's development finance role, which accounts for the larger part of the difference we have noted between the measures of PSCE. Its latest communique from late May tells us that NGN631bn had been disbursed under the CBN's anchor borrowers' programme, NGN253bn under the targeted credit facility and NGN856bn under the real sector intervention (mostly for light manufacturing). These are three of more than ten programmes covering health, the electricity business, the creative industry, youth investment and more.
The loans of four development finance institutions, led by the recapitalized Bank of Industry, amounted to a further NGN940bn in aggregate at end-2020.
The same MPC communique notes that gross banking sector credit increased by NGN850bn in Q1 â€™21 to NGN23.53trn. This appears to be a measure for the DMBs but maddeningly different to that quoted in the CBN's bulletin.
Money and credit indicators (% chg; y/y)
Sources: CBN; FBNQuest Capital Research