The loans and advances to customers from seven major banks in Nigeria jumped in the first quarter of this year as the maximum lending rate fell to 26.61 percent, the lowest in five years.
Data from the Central Bank of Nigeria (CBN) on banks’ deposit and lending interest rates showed a 1.04 percentage point drop in the average maximum lending rate to 26.61 percent in March 2022 from 27.65 percent in January.
The CBN data revealed that in the first quarter of 2018, the maximum lending rate was hovering around 31.55 percent, the highest first-quarter maximum lending rate recorded between 2018 and 2022.
Compared to the maximum lending rate in March 2018, banks’ deposit and lending interest rates declined by 4.94 percent to 26.61 percent in March 2022.
Experts have attributed the decline in maximum lending rate to excess liquidity in the banking sector.
Uche Uwaleke, president of the Association of the Capital Market Academics in Nigeria, said the interventions by the CBN also forced banks to cut interest rates on loans to customers.
He said: “When the money supply is high, it is expected to translate into low interest rates on lending to bank customers. The numerous interventions by CBN have forced down interest rates in the banking sector.
“The CBN has been extending loan facilities to key sectors of the economy and a lot of interventions are accessing these funds at single digit interest rate. The banks were forced to reduce interest rates in order to remain relevant in their major core business of lending to the real sector.”
Gloria Fadipe, head of research at FCMB, said: “Rates have been low, which has dampened banks’ yield on the loans.
“When rates are low, interest income is affected and profitability in the long run. Though, this also means the interest rate they pay on borrowed funds also drops – that is their cost of funds decline.”
Seven of the major banks in the country recorded significant increases in loans and advances to customers in the first quarter of 2022, according to their financial statements obtained from the Nigerian Exchange Limited.
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Access Bank increased its loans and advances to customers by 31.6 percent to N4.29 trillion in the first quarter (Q1) of 2022, compared to the same period a year earlier.
United Bank for Africa also reported a 5 percent increase in bank loans and advances from N2.73 trillion in Q1 2021 to N2.87 trillion in Q1 2022.
In the period under review, Zenith Bank also reported a 25 percent increase in bank loans and advances from N2.84 trillion to N3.55 trillion.
Guaranty Trust Holding Company increased its loans and advances by 4.8 percent to N1.72 trillion in Q1 2022, compared to the same period a year before.
Stanbic IBTC bank saw its loans and advances to customers surge 34 percent during the first three months of 2022 to N980 billion from N730 billion in Q1 2021.
Union Bank increased its loans and advances to customers by 19.7 percent to N853 billion from N713 billion.
Ecobank Transnational Incorporated’s loans and advances to customers rose by 6 percent to N3.87 trillion from N3.64 trillion in Q1 2021.
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