Story by Kayode Tokede
The Central Bank of Nigeria (CBN) has said consumer credit rose from N747.88billion in May 19 to N753.85 billion in June 2019.
A member of the Monetary Policy Committee (MPC) of the apex bank, Professor Festus Adenikinju in his personal statement at the July meeting said, “this is a significant increase from the figure of N632.71 billion in December 2018. Overall, personal loans accounted for 4.88 per cent of total industry loans in June 2019.
“While this is a positive development, current and proposed measures by the monetary authorities should help to boost this ratio significantly.
“Analysis of the monthly trend in credit to Real Estate, shows that there is a need for both an increase in the overall share of the loan going to this potentially high employment generation and domestic oriented sector, as well as, rebalancing of the credit going to the sector between the supply and the demand sides of the market.
“Presently, credit to Real Estate is overwhelmingly focused on the supply side, which may lead to excess supply of housing units, albeit at very low sector equilibrium level.”
A member also disclosed that Non-Performing Loans (NPL) in the banking sector have dropped to 9.6 per cent in 40 months.
The Deputy Governor, Financial System Stability, CBN, Mrs. Aishah Ahmad, in her statement said the banking industry soundness indicators remain positive with NPL ratios turned single digit at 9.36 per cent in June 2019 for the first time in 40 months.
According to her, industry capital adequacy, liquidity and profitability remain robust. “However, several months of low credit to the private sector amidst burgeoning treasury securities activity prompted the Central Bank of Nigeria’s (CBN) policy statement on July 3, mandating DMBs to build up their minimum loan to deposit ratio (LDR) to 60 per cent over a three-month period, with additional incentives (150 per cent weighting) for newmall and medium enterprises, retail, mortgage and consumer loans,” she said.
Ahmad said focus on the minimum industry LDR is expected to stimulate additional private sector credit growth, reduce credit concentration in energy assets and large corporates and lower the cost of credit – which has remained sticky downwards despite recent decreases in treasury yields.
“This expanded finance for individuals and small businesses will create jobs, enhance consumer spending and stimulate growth. Whilst some DMBs are gradually increasing credit to retail, MSMEs and the informal sector through innovative products and technology platforms, the policy initiative seeks to replicate this focus, and ramp up SME credit growth momentum across the entire industry.
The Governor, CBN, Godwin Emefiele, said the members noted the steady moderation in the NPLs ratio of the banking industry to 9.36 per cent in June from 10.95 per cent in May 2019.
According to him, “While this remained above the prudential benchmark of five per cent, its continued moderation indicates the improved resilience of the banking system.”The Committee thus emphasised its resolve to further drive down the NPLs in the industry so as to strengthen the strategic health of banks in the Country.”