Banks deprive private sector as credit to FG rises 118.45% H1

 

The net credit to the Federal Government rose by 118.45 percent to N2,512.46 billion at the end of the first half of 2015, compared with the growth of 169.44 percent or N1,150.11 billion recorded at the end of the second half of 2014.

The development, according to a report by the Central Bank of Nigeria (CBN), reflected, wholly, the rise in investment in treasury securities by the banking system, particularly Nigerian Treasury Bills, which grew by 10.4 percent. Persistent increase in credit to government deprives the private sector of needed credit to boost economic growth.

Meanwhile, net domestic credit (NDC) of the banking system grew by 11.1 percent to N21,409.77 billion at the end of the first half of 2015, compared with the growth of 32.6 percent and 14.8 perent at the end of the preceding and the corresponding period of 2014. The development reflected the increase in net claims on the Federal Government and the private sector credit.

The CBN’s Financial Stability Report revealed that credit to the private sector at end-June 2015 grew by 4.3 percent, compared with the growth rate of 11.9 percent and 4.5 percent in the preceding and corresponding periods, respectively.

The development reflected the 4.6 percent increase in claims on the core private sector5, compared with the 14.1 percent growth at the end of the second half of 2014. The contribution of claims on the private sector to the growth of total monetary assets stood at 4.1 percentage points compared with the 12.3 percentage points at the end of the second half of 2014.

Consumer credit, at N768.67 billion, fell by 9.6 per cent at end-June 2015 below the level at the end of second half of 2014, in contrast to the growth of 4.8 per cent at end-December 2014. It constituted 4.2 per cent of total credit to the core private sector, compared with 4.8 per cent at the end of the preceding half-year. This was attributed to increased risk aversion for consumer credit.

The structure of bank credit in the first half of 2015 indicated that short-term credit remained dominant. Credit maturing within one year accounted for 44.5 per cent, compared with 49.6 per cent at the end of the second half of 2014. The medium-term (≥1yr and <3yrs) and long- term (3yrs and above) credit stood at 18.8 and 36.7 per cent, compared with 19.5 and 30.9 per cent at the end of the second half of 2014, respectively