Survey Anticipates Growth in Credit This Quarter

• Survey Anticipates Growth in Credit This Quarter

The Credit Conditions Survey Report of the Central Bank of Nigeria (CBN) for the fourth quarter of 2017 has predicted an increase in availability of credit to households and firms this quarter. According to the survey obtained on Monday, the availability of secured credit to households decreased in the fourth quarter (Q4) of 2017, but was expected to increase this quarter.

Lower appetite for risk was the major factor for the decrease. It showed that lenders reported that the availability of unsecured credit to households increased in Q4 2017 and the increase in availability was also expected to be sustained this quarter.

Most lenders adduced increased appetite for risk to the increase.

“The overall availability of credit to the corporate sector increased in Q4 2017 and was expected to increase in the next quarter. Favorable economic outlook was a major factor contributing to the increase,” it stated.

Furthermore, the report stated that demand for secured lending for house purchase increased in Q4 2017, adding that more lenders expected demand for secured lending to increase further in the this quarter.

“The proportion of loan applications approved decreased despite lenders’ loosening of the credit scoring criteria. Demand for total unsecured lending from households decreased in the current quarter, and was also expected to decrease in the next quarter. “Due to lenders stance on tightening the credit scoring criteria, the proportion of approved unsecured loan applications decreased in the current quarter, but was expected to increase in the next quarter,” it added.

According to the report, secured loan performance, as measured by default rates, worsened in the review quarter. However, lenders expect lower default rates this quarter.

“Total unsecured loan performance to households, as measured by default rates, deteriorated in Q4 2017 but is expected to improve in the next quarter.

“Corporate loan performance improved across all firm sized business in the current quarter, except for small businesses. Lenders generally expect lower default in the current quarter.

“Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR widened in Q4 2017, and was expected to remain widened in the next quarter,” it added.

The spreads on overall unsecured lending narrowed in Q4 2017 and were expected to remain narrow in the next quarter.

Part of the CBN’s mandate is to nurture an efficient monetary and financial system in order to promote macroeconomic stability in Nigeria.

To achieve this, the Bank needs to, among others, understand trends and developments in credit conditions.

In carrying out the survey of bank lenders, the survey covered secured and unsecured lending to households, lending to non-financial corporations, small businesses and non-bank financial firms.

Continuing, the report stated that despite lenders’ loosening of the credit scoring criteria in Q4 2017, the proportion of loan applications approved in the quarter decreased.

Lenders expected to tighten the credit scoring criteria this quarter, yet still expect an increase in the proportion of approved households’ loan applications in Q1 2018.

Maximum Loan to Value (LTV) ratios decreased last quarter, but were expected to also increase this next quarter. Lenders, however, expressed their willingness to lend at low LTV ratios (75 per cent or less) in both Q4 2017 and this quarter, the report stated.

However, they expressed unwillingness to lend at high LTV (more than 75 per cent) in the current quarter and the next quarter.

The average credit quality on new secured lending improved in Q4 2017 and was expected to improve in Q1 2018. Lenders reported that the overall spreads on secured lending rates to households relative to MPR widened in Q4 2017 and was expected to further widen this quarter.