BusinessDay

How banks allocated credit to sectors in three months

In the last three months to the end of 2021, sectoral credit utilisation increased due to enhanced credit delivery by the banking system to support the real economy, according to a report by the Central Bank of Nigeria (CBN).

Credit utilisation by sectors of the economy grew by 6.9 per cent to N24.38 trillion at the end of December 2021, owing, largely, to the increased credit to trade/general commerce.

An analysis of credit utilisation revealed that the industry and services sectors remained the dominant sectors, as their share in total credit stood at 40.7 per cent and 53.4 per cent, respectively, compared with 41.7 percent and 52.8 per cent at the end of September 2021. The agriculture sector’s share increased by 0.6 percentage point to 6.0 per cent compared with 5.4 per cent at the end of September 2021.

Of the total claims on ‘other’ sectors, credit to the private sector grew by 27.9 per cent at end-December 2021, compared with 19.8 per cent at end-September 2021. The development signifies improved credit delivery to the real economy by the banking system congruent with the Bank’s accommodative policy stance.

The CBN’s economic report for the fourth quarter of 2021 show that consumer credit outstanding increased due to higher personal and retail loans.

Consumer credit outstanding, at N2.07 trillion, rose by 6.7 per cent at the end of December 2021 from N1.9 trillion at the end of September 2021.

At that level, consumer credit constituted 8.5 per cent of total credit to the private sector. The growth in consumer credit could be ascribed to the slight decline in the maximum lending rate in the review quarter.

A breakdown of consumer loans showed that personal loans sustained its dominance, accounting for the largest share of 74.9 per cent, while retail loans explained the remaining 25.1 per cent.

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Monetary developments revealed that reserve money grew in the last quarter of 2021 due to increased currency-in-circulation. Currency-in-circulation (CIC) grew by 14.3 per cent, arising from the end of year festivities and reinforced by liquidity injection into the banking system from matured CBN bills and Federation Account Allocation Committee (FAAC) disbursements.

The growth in CIC led to a 1.4 per cent rise in reserve money to N13.3 trillion at the end of December 2021, from N12.90 trillion at the end of September 2021.

The growth in broad money surpassed its benchmark for fiscal 2021. With the money multiplier at 3.3 at the end of December 2021, broad money supply (M3) grew by 12.6 per cent, above the indicative benchmark of 9.99 per cent for fiscal 2021. The development reflected a significant expansion in domestic claims (17.3 per cent), which more than offset the 1.8 per cent decline in net foreign assets (NFA). The rise in Net Domestic Asset (NDA) was due to the 15.9 per cent growth in net claims on central government and the 17.8 per cent increase in claims on ‘other’ sectors.

Furthermore, the report noted that the corresponding growth in total monetary liabilities stems from the rise in currency outside depository corporations (17.7 per cent), transferable deposits (14.2 per cent), and ‘other’ deposits (16.6 per cent).

‘Other’ deposits contributed the most to the growth of broad money liabilities (9.40 percentage points), while transferable deposits and currency outside depository corporations contributed 4.9 and 1.1 percentage points, respectively. The growth in ‘other’ deposits hinged on the rise in savings, time, and foreign currency deposits, resulting from higher yields on savings and time deposits.

This was reflected by the rise in 3-months and 12-months deposits rates to 4.94 and 6.79 per cent at end-December 2021 from 4.64 and 6.72 per cent at the end of September 2021, respectively. The upsurge in currency outside depository corporations and transferable deposits arising from growing demand for cash for the yuletide season prompted growth in narrow money supply (M1) by 14.7 per cent to N18.17 trillion in the review quarter.

The rise in 3-months and 12-months deposits rates to 4.94 and 6.79 per cent at end-December 2021 from 4.64 and 6.72 per cent at the end of September 2021, respectively. The upsurge in currency outside depository corporations and transferable deposits arising from growing demand for cash for the yuletide season prompted growth in narrow money supply (M1) by 14.7 per cent to N18.17 trillion in the review quarter.

The financial markets remained resilient in the fourth quarter of 2021 despite the negative impact of the Omicron variant of the COVID-19 pandemic. The positive development boosted investors’ confidence, resulting in a bullish stance on the major equity market indices on the Nigerian Exchange Limited.

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