Lenders to Ease Loan Criteria in Q1, 2020 – CBN

• Lenders to Ease Loan Criteria in Q1, 2020 – CBN

The Central Bank of Nigeria has said the nation’s lenders will start reducing loan criteria in an effort to shore up their approved households’ loan applications.

In the ‘Credit Condition Survey Report for the fourth Quarter of 2019’, the apex bank attributed the projection to rising liquidity positions amid other initiatives instituted by the CBN to improve credit facility and deepen economic activity.

“Maximum Loan to Value (LTV) ratios increased in the current quarter and was expected to remain unchanged in the next quarter. Lenders were willing to lend at low LTV ratios (75% or less) in the current and next quarters.

“Similarly, they were willing to lend at high LTV (more than 75%) in both the current and next quarters (Table 1, Item 10). The average credit quality on new secured lending improved in Q4 2019 and was expected to also improve in Q1 2020.

“Lenders reported that the overall spreads on secured lending rates to households relative to Monetary Policy Rate (MPR), narrowed in Q4 2019, but were expected to remain unchanged in the next quarter. Spreads for all lending types narrowed in the current quarter but were expected to remain unchanged in the next quarter,” the report explained.

The report also shows that household demand for consumer loans rose in the final quarter of 2019 and it is expected to increase in the first quarter of 2020.

“Secured loan performance, as measured by default rates, improved in Q4 2019 and is expected to improve in Q1 2020. Similarly, bank lenders reported lower losses given default by households in the current quarter and expect lower losses in the next quarters.

“The availability of unsecured credit provided to households increased in the current quarter and is expected to increase in the next quarter, with improvement in market share objectives and higher appetite for risk as factors responsible for the increase.

“In spite of lenders’ resolve to leave the credit scoring criterion for total unsecured loan applications unchanged in the review quarter, the proportion of approved total loan applications for households increased. Lenders expect to tighten the credit scoring criteria in the next quarter but anticipate that the proportion of approved loan applications in Q1 2020 will increase.

“The proportion of approved credit card loans increased in Q4 2019, though the credit scoring criteria for granting credit card loans remained unchanged. Similarly, the proportion of approved overdraft/personal loans applications increased, as lenders loosened the credit scoring criteria.