Increased Banking Credit to the Private Sector; Records 1.7% MoM Increase in October 2021

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Monday, December 20, 2021 / 11:52 AM / by CSL Research / Header Image Credit:  CSL Research

 

The recent money and credit statistics released by the Central Bank of Nigeria (CBN) showed a 1.7% m/m increase in credit to the private sector, reaching another high of N34.5tn as of October from N33.9tn in September 2021. Yearly, private sector credit was also up by 18.6% y/y from N29.1tn in October 2020. Meanwhile, credit to the government declined by 1.0% m/m to N12.9tn in October from N13.0tn in September 2021. The real sector has largely benefitted from the CBN's sustained monetary stimulus evidenced by the fact that the economy has returned to growth and the government's fiscal position has increased through improved CIT (+20.1% y/y in 9M 2021) and VAT collections (+40.2% y/y in 9M 2021) arising from recovery in economic activities.

 

The expansion in private sector credit reflects the CBN's continued efforts to revive the ailing economy. The CBN has been relatively successful at supporting output recovery. One, thus far in 2021, the apex bank has maintained the benchmark Monetary Policy Rate (MPR) at 11.5%, avoiding any further tightening that could stifle credit growth While a huge proportion of the credit was towards sectors such as agriculture, oil & gas, and manufacturing sectors, the Non-Performing Loan (NPL) ratio of Deposit Money Banks (DMBs) have remained moderate as CBN allowed banks to restructure loans to the strained sectors.

 

Increasing oil prices have also been supportive as many of the restructured loans to the oil and gas sector have been reported to be meeting the new terms. That said, lower yields on investment securities have forced many banks to increase lending to the real sector of the economy. In the 9 months of 2021, based on released numbers, Zenith Bank recorded a net loan growth of 8.7% relative to December 2020. Also, Access (+16.4%), UBA (+12.4%), GTCO (+4.5%), Stanbic (+31.5%), and Sterling (+13.4%) recorded a net loan growth when compared to December 2020. The sustained credit to the economy has been a valuable stimulus tool. However, the agelong structural bottlenecks that have affected growth remain a problem.

 

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