Bank loans

Bank lending to the private sector reaches N35.7 billion

Bank loans to the private sector increase by 16.67%

By Jeph Ajobaju, Editor-in-Chief

Banks extended N35.73 trillion in loans to the private sector in 2021, an increase of N5.1 trillion or 16.67% year-on-year (YoY), according to the latest data from the Central Bank of Nigeria (CBN).

Credit to the private sector increased by N5.6 trillion year-on-year from N30.1 trillion in 2020 to N35.7 trillion in 2021, boosted by CBN initiatives to see more loans granted to the real sector to increase productivity and revive the economy.

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According to CBN data, monthly bank credit advances to the private sector in 2021 are as follows:

  • January – 30.6 trillion naira
  • February – 30.5 trillion naira
  • March – 31.4 trillion naira
  • April – 31.9 trillion naira
  • May – 32.1 trillion naira
  • June – 32.6 trillion naira
  • July – 32.8 trillion naira
  • August – 33.4 trillion naira
  • September – 34.39 trillion naira
  • October – 35.3 trillion naira
  • November – 35.7 trillion naira

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CBN Policy Measures

The CBN introduced a new policy in June 2019 that requires banks to maintain a loan-to-deposit ratio (LDR) of at least 60%, in order to make credit available to the real sector and contribute to the growth of lending. ‘economy.

It raised the LDR to 65% in October of the same year after the September 30 deadline given to banks to meet the 60% guideline, per a statement by The punch.

At the end of 2019, banks advanced N17.1 trillion to the real sector, the highest amount in almost five years.

A member of the CBN’s Monetary Policy Committee (MPC), Festus Adenikinju, confirmed in November 2021 that even non-banking financial institutions contributed to the rise in overall credit to the economy.

“The report on other financial institutions [OFI] have been shown to contribute significantly to aggregate consumer credit.

“Other financial institutions granted 22.39 million facilities to 9.23 million loan recipients, of which 69.26 thousand were consumer businesses.

“Overall, OFIs have contributed an additional N2.79 trillion or 10.62% to banking sector credit over the past year,” he revealed after a meeting of the MPC in Abuja.

Ahmad Aishah, another MPC member, said the improvements in the macroeconomy have been propelled by a resilient financial system which has channeled ample credit to support growth-friendly sectors such as agriculture, manufacturing, trade general, as well as individuals and households.

His words: “Total credit increased by N4.1 trillion (21.12%) between end-October 2020 and end-October 2021, largely due to increased industry funding base and of the CBN’s loan-to-deposit ratio policy, which encouraged banks to increase their lending to the real sector of the economy.

“This credit to the real sector has been essential for the economic recovery.”

Impact of loan increase not visible

A lecturer in economics at the Pan-Atlantic University, Olalekan Aworinde, said: “It is also noticed that due to the increase in the LDR ratio, some banks have ventured into other activities in order to spread their risks. “

Aworinde, however, insisted that the multiplier effects of lending are not visible as most banks lend at double-digit interest rates and structural and cyclical changes in the economy affect the overall effect of LDR.

“The target is not fully achieved, as borrowers do not have substantial collateral as collateral, which further hampers their access to finance.

The government must create an environment conducive to the prosperity of small and medium-sized enterprises in order to stimulate growth. »