By Seun Ibiyemi
Banks’ credit to the private sector hit its highest level in May 2022, reaching N38.19 trillion from N35.19 trillion recorded as of December 2021, representing a N3 trillion increase within six months.
This is according to data obtained from the Central Bank of Nigeria.
Based on the data, credit to the private sector in Year-on-Year performance has surged by N6.08 trillion from N32.12 trillion reported by the CBN in May 2021. This is indicative of an 18.9 per cent increase within 12 months.
The increase in bank credit is in line with the CBN’s mandate to give the real sector easy access to credit in order to ensure economic stability.
Also, innovation in technology and the surge in the number of FinTechs in the lending space have brought more competition to the Nigerian lending sector.
The CBN’s Loan to Deposit Ratio (LDR) policy, which was put in place to expand lending to the real sector to grow the economy, can be connected to the expansion of banks’ loan books.
After giving banks till September 30, 2019, to comply with its 60 per cent mandate, CBN upped the Loan to Deposit Ratio of banks to 65 per cent in October 2019. However, the Bank extended the deadline for the LDR by 65 per cent to March 31, 2020.
When the LDR policy was put into effect in 2019, credit to the private sector increased by N3.75 trillion, from N22.95 trillion when it first opened in 2019, to N26.69 trillion when it closed. From N26.65 trillion in January 2020 to N30.15 trillion in December 2020, credit to the private sector increased by N3.5 trillion in 2020.
Furthermore, in the full year of 2021, credit to the private sector rose by N4.7trillion in 2021 to stand at N35.19 trillion from N30.40 trillion reported by the CBN in January 2021.
The data shows that private sector credit reached N35.99 trillion in February and will hit N36.47 trillion in March 2022. In April, it hit N37.68 trillion, surpassing the N37 trillion mark.
Currency in circulation in Nigeria rose from N1.15 trillion in 2021 to N3.33 trillion as of December 2021 its highest level on record.
However, Currency in circulation maintained the same figure in May 2022 to stand at N3.33trillion.
The CBN in its last MPC meeting hiked the country’s benchmark interest rate (MPR) to 13 per cent from the 11.5 per cent maintained all through 2021 in a bid to stamp out inflation.