Bank credit to the private sector increases as the economy recovers

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Monday, November 1, 2021 / 12:45 p.m. / by CSL Research / Header image credit: CSL Stockbroking

The need to improve lending to the private sector cannot be overemphasized amid the economic shocks induced by the pandemic in many sectors of the economy. Interestingly, recent monetary and credit statistics released by the Central Bank of Nigeria (CBN) showed a 1.3% m / m increase in credit to the private sector, reaching a peak of 33.8 billion naira in September. 2021 compared to 33.4 billion naira in August. Likewise, year-on-year credit to the private sector increased 13.8 percent year-on-year from N29.7 billion in September 2020. Further information also revealed that credit to the government has increased. increased by 2.9% m / m and 34.6% y / y. y to N13.0tn in September from N12.7tn in August 2021 and N9.7tn in September 2020.


The m / m and y / y expansion of credit to the private sector reflects the CBN’s continued efforts to revive the struggling economy. The CBN has been relatively successful in supporting the resumption of production. One, so far in 2021, the umbrella bank has kept the monetary policy benchmark (MPR) rate at 11.5%, avoiding any further tightening that could stifle credit growth as a huge proportion of credit was aimed at sectors such as agriculture, oil and gas, and manufacturing sectors, the non-performing loan (NPL) ratio of deposit banks (DMB) remained subdued as the CBN enabled banks to restructure loans to sectors in difficulty.

The increase in oil prices was also favorable, as it was reported that many restructured loans to the oil and gas sector met the new conditions. However, declining yields on investment securities have forced many banks to increase their lending to the real sector of the economy. In the 9 months of 2021, based on published figures, Zenith Bank recorded a net loan growth of 8.7% compared to December 2020. In addition, Access (+ 16.4%), UBA (+ 12.4%), GTCO (+ 4.5%), Stanbic (+ 31.5%) and Sterling (+ 13.4%) recorded net loan growth compared to December 2020.

A few sectors in Nigeria are showing signs of recovery, evident in the GDP growth of 5.0% in the second quarter of 2021. Although the base effect in the non-oil sector contributed to growth in the second quarter, some sectors did. experienced a resumption of activities. However, we note that structural bottlenecks in the operating environment, coupled with the weak fiscal position, will continue to limit the effectiveness of monetary policy tools to achieve the necessary inclusive economic growth.

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