N33.3trn peak level: 65% LDR drives Banks’ credit to private sector
By Alao Matthew & Kayode Tokede
The Central Bank of Nigeria (CBN) has said that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021, Nigerian NewsDirect gathered.
The reported N33.36trillion by the apex bank is a new figure that is fuelled by banks lending to real sector.
CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.
However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.
In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
The apex bank in its Money and Credit Statistics revealed that credit to private sector crossed the N32 trillion mark in May and since then, maintained growth.
Our correspondent gathered can credit to private sector in seven months of 2021 appreciated by N2.19trillion to underlined banks supporting the apex bank in lending to real sector and creating jobs.
Further finding revealed that credit to private sector July 2020 hits a peak of N30.19trillion amid the ease in COVID-19 lockdown.
Analysts have expressed that banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).
Commenting on the impact of private sector lending to Small and medium-sized enterprises (SMEs), Head, Retail Investment, Chapel Hill Denham, Mr. Ayodeji Ebo said, “There has not been a major credit to SMEs aside government intervention.”
According to the CBN, credit to government rose by 5.3 per cent to N12.13trillion in July from N11.52trillion in June.
Ebo said banks lending towards government bond, and Commercial papers and corporate lending increased recently.
Commenting credit to private sector, an Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable, stressing that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.
He explained further that, “My guess is that a significant percentage of this has been given to large corporates, multinationals and high end medium enterprises.
“The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.
“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity.
“The context in which businesses are operating is as important as the funding, if not even more important.
“The totality of the investment environment must be right for sustainable real sector development to be achieved.
“Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways.
“There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.
“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems.
“Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”
Investigation by Nigerian NewsDirect revealed that between January and June 2021, a total of 11 banks granted N20.7trillion as loans & advances to customers.
According to Nigerian NewsDirect investigation, Ecobank Transnational Incorporated (ETI) with N3.63trillion loans & advances to customers, followed by Access Bank Plc with N3.58trillion loans top the chart in most banks loans by value granted to customers in the period under review.
The other affected banks include Zenith Bank (N2.84trillion), United Bank for Africa (N2.63 trillion), FBN Holdings, (N2.54trillion), Guaranty Trust Holdings Company Plc (N1.63trillion), Fidelity Bank Plc (N1.54trillion), FCMB Group (N9166.7billion). Stanbic IBTC (N767.8billion) and Sterling Bank Plc (646.88billion) loans & advances to customers as at June 30, 2021.
Accordingly, the 11 banks’ loans to customers rose marginally by six per cent or N1.22trillion from N19.51trillion reported in full year ended December 31, 2020.
The likes of Guaranty Trust Holdings Company Plc (GTCO) reported N30.64billion or two per cent drop in loans to customers to N1.63trillion as at June 30, 2021 from N1.66 trillion recorded in 2020 while ETI’s loans to customers also dropped by N64.6billion or two per cent to N3.63trililion as at June 30, 2021 from N3.7trillion in 2020.
GTCO in a statement attributed the decline in loans to customers to decrease in FCY loan portfolio as a result of scheduled repayments from obligors in the oil & gas and manufacturing sectors and the decision by management to de-risk the FCY component of its loan book in view of the difficulty experienced by one key obligor in meeting its repayment obligation.
Aside the above two, other banks recorded impressive increase in loans granted to customers in the period.
Specifically, Access Bank grew its loans book by N364.8billion or 11 per cent to N3.58trillion from N3.22trillion in 2020, while United Bank for Africa Plc granted customers N2.63trillion, an increase of N29.58billion or three per cent increase from N2.55billion granted in 2020.
FBN Holdings between January and June of this year has granted N2.54 trillion as loans to customers, an increase of N320.7billion or 14 per cent from N2.22trilion in 2020.
Another Tier-1 bank, Zenith Bank granted additional N58.42billion or two per cent increase as loans to customers to N2.84trillion as at June 30, 2021 from N2.78trillion in 2020.
Fidelity Bank recorded N209.33billion or 16 per cent increase in loans to customers from N1.33trillion in 2020 to N1.54trillion as at June 30, 2020 while FCMB Group recorded N93.91billion or 11 per cent in loans & advances to customers from N822.77billion in 2020 to N916.7billion reported as at June 30, 2021.
In addition, Stanbic IBTC Holdings recorded N134.85billion or 21 per cent increase in loans to customers to N767.82billion as at June 30, 2021 from N632.96billion recorded in 2020 as Sterling Bank granted N646.88 billion as loans as at June 30, 2021, an increase of N50.06billion or eight per cent increase from N596.83billion in 2020.
Analysts expressed that the apex bank 65 per cent Loan-to-Deposit (LDR) impacted positively on credit to private sector and drive Gross Domestic Product (GDP).
Speaking from a different perspective, the President, Association of Capital Market Academics of Nigeria (ACMAN), Prof Uche Uwaleke had said the increase has no noticeable impact on the real sector which concerns the production, purchase, flow of goods and services.
He said, “Increase in private sector lending is expected to manifest in increased output, lower inflation, lower interest rates, improved Purchasing Managers Index and stock market performance as well as job creation opportunities.
“While inflation rate in June trended marginally downward, available evidence regarding the other metrics does not indicate any significant impact of the increase in private sector lending on the economy.”
He suggested that, “for impact to be noticeable, it needs to be sustained and scaled up, especially targeting critical sectors of the economy with job creation potentials such as SMEs.”
According to the CBN statistics, Money Supply (M3) increased to N39.79trillion in July from N38.78trillion in January 2021, while Narrow Money rose by 2.15 per cent from N15.95trillion in January to N16.29trillion in July.
Net Domestic Assets (NDA) increased to N44.97trillion in July, an increase of five per cent from N42.95trillio in January.
The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of Monetary Policy Committee (MPC) meeting in August said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.
According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”
He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.
“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.
“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.
