Bank lending to private sector rises to N38.19tr

By on July 22, 2022 0

Bank lending to the private sector sees N3tr increase in 5 months

By Jeph Ajobaju, Editor-in-Chief

Loans to the private sector from banks increased by 3 trillion naira in five months, from 35.19 trillion naira in December 2021 to 38.19 trillion naira in May 2022, according to data from the Central Bank of Nigeria. (CBN).

Credit to the private sector grew year-on-year (YoY) by N6.08 trillion, from N32.12 trillion in May 2021, an 18.9% growth in 12 months.

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This is in line with the CBN’s mandate to give the real sector easy access to credit to help stabilize and grow the economy.

Technological innovation and the increase in the number of fintech lenders have also boosted competition in the lending market.

The CBN’s loan-to-deposit ratio (LDR) policy formulated to expand lending to the real sector is also linked to increased bank lending.

The CBN first gave banks until September 30, 2019 to comply with its 60% guideline, then raised their LDR to 65% in October 2019. It then extended the deadline until March 31, 2020.

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Impact of the LDR policy

Credit to the private sector increased by 3.75 trillion naira from 22.95 trillion naira when it opened in 2019 to 26.69 trillion naira when it closed, according to CBN data, as reported by Nairametry.

It increased from 26.65 trillion naira in January 2020 to 30.15 trillion naira in December 2020, an increase of 3.5 trillion naira.

It increased by 4.7 trillion naira from 30.40 trillion naira in January 2021 to 35.19 trillion naira in December 2021.

Credit to the private sector reached 35.99 trillion naira in February 2022, March (36.47 trillion naira) and April (37.68 trillion naira).

Currency in circulation increased from 1.15 trillion naira in January 2021 to 3.33 trillion naira in December 2021, the highest level on record, which was the same amount in May 2022.

The CBN in its last meeting of the Monetary Policy Committee (MPC) raised the benchmark interest rate (MPR) to 13% from 11.5% maintained throughout 2021 to curb inflation.