The Central Bank of Nigeria (CBN) has disclosed that banking sector credit to private sector increased year-on-year to N35.45 trillion as at January 2022, up by 33 per cent compared to January 2021.
Credit to private sector stood at N35.19 trillion as of December 2021.
The apex bank in its latest money and credit statistics also disclosed that credit to government rose by 48 per cent year-on-year to N14.28trillion in January 2022, up from the N9.65 trillion recorded in January 2021.
Furthermore, the CBN data disclosed that broad money supply in January increased to N44.56trillion, from December 2021, while narrow money supply appreciated by 3.03 per cent month-on-month to close January 2022 at N18.72 trillion from N18.17 trilion in December.
Analysts have commended the rise in credit to private sector which they attributed to the CBN’s loan-to-deposit ratio (LDR) policy and other fines for defaulting on cash reserve requirement (CRR).
The Head, Financial Institutions Ratings, Agusto & Co, Ayokunle Olubunmi, however, said the trend may not persist in the second and third quarter.
He added: “Don’t forget the recent explanation on waivers we have on treasury bills and bonds. So, most banks are now checking their strategy and it might be better for you to actually to lend than going to invest in those securities because.”
“In the near term, we expect some slowdown at least from the second to third quarter because as we are moving closer to elections, most people would try to scale down operations.
“Not that businesses would close, but they would not be expanding their production. So we don’t expect credit to the private sector to be high but it would however be moderate,” he added.
Also, an Economist & Private Sector Advocate, Dr. Muda Yusuf said growth in credit to private sector was 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 have 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.”
He further added: “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.”
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