Private sector bank loans rise 16.67%
By Jeph Ajobaju, Chief Copy Editor
Banks granted N35.73 trillion loans to the private sector in 2021, a rise by N5.1 trillion or 16.67 per cent year-on-year (YoY), latest Central Bank of Nigeria (CBN) data shows.
Credit to the private sector rose by N5.6 trillion YoY from N30.1 trillion in 2020 to N35.7 trillion in 2021, spurred by the initiatives of the CBN to see more loans granted the real sector to increase productivity and lift the economy.
According to CBN data, banks’ monthly credit advances to the private sector in 2021 are as follows:
- January – N30.6 trillion
- February – N30.5 trillion
- March – N31.4 trillion
- April – N31.9 trillion
- May – N32.1 trillion
- June – N32.6 trillion
- July – N32.8 trillion
- August – N33.4 trillion
- September – N34.39 trillion
- October – N35.3 trillion
- November – N35.7 trillion
__________________________________________________________________
Related articles:
28 firms get N23.2b CBN loan through PPP
Banks scramble for CBN loans as funds scarcity dips 2,183%
UBA tops competition with N178b loan grant
CBN projects 3.2% economic growth, World Bank 2.5%
__________________________________________________________________
CBN policy measures
The CBN introduced in June 2019 a new policy which requires banks to maintain a minimum 60 per cent Loan to Deposit Ratio (LDR), so as to make credit available to the real sector and help grow the economy.
It raised LDR to 65 per cent in October that year after the September 30 deadline given to banks to meet the 60 per cent directive, per reporting by The PUNCH.
At the end of 2019, banks advanced N17.1 trillion to the real sector, the highest amount in nearly five years.
A member of the CBN Monetary Policy Committee (MPC), Festus Adenikinju, confirmed in November 2021 that even non-bank financial institutions contributed to the rise in aggregate credit to the economy.
“The report on the Other Financial Institutions [OFI] showed that they contributed significantly to aggregate consumer credit.
“Other Financial Institutions granted 22.39 million facilities to 9.23 million loan beneficiaries out of which 69.26 thousand were corporate consumers.
“Overall, OFIs contributed an additional N2.79 trillion or 10.62 per cent to the banking sector credit in the past one year, ” he disclosed after a meeting of the MPC in Abuja.
Ahmad Aishah, another member of the MPC, said improvements in the macro economy were propelled by a resilient financial system which channeled significant credit to support growth-enhancing sectors such as agriculture, manufacturing, general commerce, as well as individuals and households.
His words: “Total credit increased by N4.1 trillion (21.12 per cent) between the end of October 2020 and the end of October 2021, due largely to the increase in the industry funding base and the CBN’s Loans to Deposit Ratio policy, which has encouraged banks to increase lending to the real sector of the economy.
“This credit to the real sector has been critical for the economic recovery.”
Impact of loan increase not visible
A senior lecturer in economics at Pan Atlantic University, Olalekan Aworinde, said: “Also noticeable is that because of the increase in LDR ratio, some banks ventured into other businesses in order to spread their risks.”
Aworinde insisted, however, that the multiplier effects of loans are not visible because most banks lend at double-digit interest rates and the structural and cyclical changes in the economy affect overall effect of LDR.
“The objective has not been totally achieved, because the borrowers do not have substantial collateral securities and this still hampers their access to finance.
The government needs to create an enabling environment for small and medium-scale businesses to thrive in order to enhance growth.”
