Cost of borrowing from Nigerian banks dropped by 46.29 percentage points in one month according to Festus Adenikinju, a member of the Monetary Policy Committee (MPC).
He said in his personal statement at the last MPC meeting that 70.93 percent of loan recipients in April 2022, accessed those loans at 15 percent or below, compared with 61.29 percent in March 2022.
“This shows more bank customers were able to access loans at lower interest rates over the two periods,” he said.
Industry credit increased by N4.65 trillion between April 2021 and April 2022. The growth was attributed primarily to increased funding base of the industry and the CBN’s Loan to Deposit Ratio (LDR) policy.
All sectors of the economy have benefitted from the increased lending with the top three being oil and gas, manufacturing, and general.
However, governments rank as the fourth largest beneficiary of total credit. In terms of sectors that recorded the highest increase in gross credit between the end of May 2019 and April 2022, governments are in the top three, after manufacturing and General (retail and personal loans).
Other financial institutions (OFIs) are also doing well, he said, adding that between April 2021 and April 2022, OFIs grew total assets by 11 percent, total credit by 21 percent, total deposits by 16 percent and total borrowings by 11 percent.
Read also: CBN directs OFIs to comply with cyber security rules by January 2023
The OFIs provide the avenue for increasing financial inclusiveness in the Nigerian economy.
Aisha Ahmad, deputy governor of the central bank in charge of financial system stability, said sustaining banking sector lending to critical sectors of the economy will be paramount as monetary policy tightens to contain inflation.
In May 2022, the CBN raised its benchmark interest rate, known as the Monetary Policy Rate (MPR), by 150 basis points to 13 percent, the first time in six years.
The apex bank retained the asymmetric corridor around the MPR at +100 /-700 basis points, Cash Reserve Ratio (CRR) at 27.4 percent, and Liquidity Ratio (LR) at 30 percent.
Given the positive correlation of market lending rates to the MPR, she said it is expected that borrowing costs will rise, possibly restricting loan growth.
“Gratuitously, the CBN’s intervention loans targeted at selected industries and
SMEs will remain at 5 percent per annum till March 2023, which stabilises access to affordable finance for employment-generating sectors. This should be positive for the macro-economy, stimulating further output growth and positioning businesses to maintain strong cash flows whilst minimising default risk and preserving financial stability,” Ahmad said in her personal statement.
Robert Asogwa, member of the MPC said the banking industry remains strong and resilient with an expanding total asset base and an increasing dynamism in credit performance across different sectors.
“There are, however, minor concerns about the recent negative trend in the asset quality as the non-performing loans ratio increased marginally from 5.1 percent in March 2022 to 5.3 percent in April, 2022, while key profitability indicators such as Return on Equity (ROE) and Return on Assets (ROA) seems to have stagnated in recent months,” he said.
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