Tuesday, April 07, 2015 5.59Pm/CBN
Credit Conditions Survey Q1’15
As part of its mission to maintain monetary and financial stability, the Bank needs to understand trends and developments in credit conditions. This quarterly survey of bank lenders is an input to this work. Lenders were asked about trends and developments in credit conditions in the previous and next quarters. The survey covers secured and unsecured lending to households; and lending to non-financial corporations, small businesses and to non-bank financial firms. Along with various data sources and discussions between the major lenders and Bank staff, this survey serves as an input into the Monetary Policy documents which presents the CBN assessment of the latest trends in lending to the Nigerian economy.
This report presents the results of the Q1, 2015 survey which was conducted from 23rd -27th February 2015.
• The availability of secured credit to households decreased in Q1, 2015 but was expected to increase in the next quarter. Changing liquidity positions remained a major factor behind the decrease; lenders further reported that tight wholesale funding conditions also made significant contributions.
• Lenders reported that the availability of unsecured credit to households increased in Q1, 2015 and it is expected to increase further in Q2, 2015. Lenders reported that changing cost/availability of funds, market share objectives and changing appetite for risk contributed to the increased availability of unsecured credit in Q1, 2015.
• The overall availability of credit to the corporate sector increased in Q1 2015 and was expected to increase further in Q2, 2015. The important factors contributing to increased credit availability were changing sector specific risks, changing economic outlook and market share objective.
• Demand for secured lending for house purchase and consumer loans increased in Q1 2015, and were expected to increase further in Q2, 2015. Despite lenders stance in tightening the credit scoring criteria in the current quarter, the proportion of loan applications approved in Q1, 2015 increased.
• Demand for unsecured credit card lending and an overdraft/personal loan from households increased in the current quarter, and are expected to further increase in the next quarter. However, demand for unsecured credit card lending from small businesses was expected to decrease in Q1, 2015, while demand for overdraft/personal loans from small businesses was expected to further increase. In spite of the tightening in the credit scoring criteria in total unsecured loan applications in Q1 2015, the proportion of approved households total loan applications improved in the current quarter.
• Lenders reported increased demand for corporate credit across all firm sizes in Q1, 2015. It is expected that credit demand would further increase for all businesses in the next quarter except for demand from OFCs. Following the narrow spread between bank rates (on small businesses and OFCs) and MPR, the proportion of loan applications approved for small businesses, medium and large PNFCs increased in Q1, 2015 and further increase is anticipated in the next quarter.
• Secured loan performance, as measured by default rates and losses given default, improved in the review quarter. Similarly, lenders expected improved performance as both default rates and loss given default are expected to further fall in Q2, 2015.
• Unsecured loan performance on credit card loans and overdraft/personal loans to households, as measured by default rate and losses given default also improved in Q1 2015 and were expected to further improve in the next quarter.
• Corporate loan performance was better as default rates and losses given default on lending to all sized businesses fell in Q1, 2015 and were expected to fall further in Q2, 2015.
• Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR narrowed in Q1 2015, but it is expected to widen in Q2, 2015.
• Lenders reported that spreads on credit card lending widened in Q1, 2015 and it is expected to narrow in the next quarter. Other unsecured lending products on approved new loans such as overdrafts/personal loans on approved new loans widened in Q1 2015, and is expected to further narrow in Q2, 2015.
Changes in spreads between bank rates and MPR on approved new loan applications to the small and medium and large PNFCs and OFCs was mixed in Q1, 2015. While spreads to small businesses and OFCs widened in the review quarter, the spreads on medium and large PNFCs narrowed in the same quarter. Spreads for all business types is expected to narrow in the next quarter.