The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.
The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.
CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.
However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.
In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).
An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.
“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”
On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.
He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.
Yusuf said: “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 added, “Therefore, 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.”
The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.
According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”
He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.
“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.
“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.
Research Indentifies Major Factors in Growth of Structured Credit Market
A new survey from Aeon Investments, the London based credit-focused investment company, with institutional investors in Europe and the US who collectively have around $574 billion in assets under management, reveals the major factors behind more professional investors increasing their allocation to structured credit.
When asked for their top three reasons for this trend, 44% selected greater innovation in the structured credit market, followed by 40% who included greater transparency in the sector.
This was followed by an improving regulatory environment, which 31% of professional investors included in their top three reasons for more professional investors increasing their allocation to structured credit; 22% cited the fact that they can offer attractive yields, which have become even more appealing given the current difficulties in the fixed income market, and one in five (20%) selected the sector’s growing focus on ESG. Some 13% cited structured credit’s ability to offer attractive diversification benefits as one of their top three reasons.
Which structured credit sectors will see the biggest increase in asset allocation from investors?
In terms of which areas of the structured credit market is likely to see the biggest inflows from investors over the next 18 months, 63% anticipate allocations to products focusing on residential real estate will see an increase, and 63% also expect this from those investment vehicles focusing on commercial real estate. Some 49% of respondents expect an increase in investment inflows into structured credit vehicles focusing on consumer credit such as student loans, auto credit/leases, compared to 11% who anticipate a decline. The corresponding figures for flows into structured credit vehicles concentrating on specialist areas of corporate finance such as commercial aviation, shipping, and trade receivables, is 42% and 12%.
Evgeny van der Geest, Managing Director, Aeon Investments said: “In recent years, the structured credit market has seen huge developments in terms of maturity and transparency, and this trend continues to gather pace. This, coupled with a growing desire to diversify portfolios and the search for yield, means more professional investors are increasing their allocation to structured credit investments.”
Private Sector Loans Reaches All-Time High of N37.13 trillion in April – CBN says
The Central Bank of Nigeria (CBN) has said credit to the private sector rose to N37.13tn as of April 2022 as banks increase lending to the real sector to create jobs and expand the country’s Gross Domestic Product (GDP).
The apex bank disclosed in its ‘Money and Credit Statistics’ report. From the year to date, credit to the private sector rose by 5.53% or N1.95 trillion from N35.18 trillion reported in January 2022.
In 2021, credit to the private sector jumped by N5.58 trillion to a record N35.73 trillion.
In the latest report from the central bank, credit to the private sector rose from N35.99 trillion in February to N36.37 trillion in March 2022, representing an increase of 1.07%.
The Monetary Policy Committee (MPC) attributed the growth in private sector lending to the increase in industry funding base and compliance with the 65 percent Loans to Deposit Ratio (LDR) directive.
The CBN also disclosed that it had reviewed the performance of its various interventions to stimulate productivity in manufacturing, industry, agriculture, energy, infrastructure, healthcare, and micro, small and medium enterprises.
The governor of CBN, Mr. Godwin Emefiele, in his statement at the end of March MPC, noted that the growth reflected the continued growth of banking system credits to the private sector supported by the sustained drive of the apex bank to increase lending to high-impact real sector ventures.
He had disclosed that gross credit maintained its upward trajectory since 2019, with an N4.13tn or 19.53 percent growth in industry credit between February 2021 and 2022.
Deputy Governor of Financial System Stability of the CBN, Aisha Ahmad, at the MPC meeting of March 2022 in Abuja, said, “The continued credit growth, particularly to output enhancing sectors, is expected to support economic recovery further. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system from lingering macroeconomic risks.”
Despite Majority’s Refusal To Pay Back, CBN Loans to Farmers Hikes to N1 Trillion
The Central Bank of Nigeria (CBN) has revealed that a sum of N1 trillion in loans has been disbursed to farmers across the country as of April despite the refusal of most beneficiaries to pay back.
Recall that Investors King reported CBN’s outcry over a majority of the farmers who benefited from the Anchor Borrower’s Programme (ABP), but refused to pay back.
Investors King gathered that the majority of the beneficiaries regard the loan as their part of the national cake and they do not have to pay back what they consider theirs as citizens. This attitude made it difficult for other farmers, who also want to access the loan, to benefit from the scheme.
According to figures gathered from the CBN’s Monetary Policy Committee members’ report, “Between January and February 2022, the bank disbursed N29.67bn under the Anchor Borrowers’ Programme for the procurement of inputs and cultivation of maize, rice, and wheat, three crops that hitherto were significant concerns of FX demand.
“These disbursements bring the total under the programme to over 4.52 million smallholder farmers, cultivating 21 commodities across the country, comes to a total of N975.61bn.”
The CBN stated in its most recent MPC report, “Between April and May 2022, the Bank released the sum of N57.91bn under the Anchor Borrowers’ Programme to 185,972 new projects for the cultivation of rice, wheat, and maize, bringing the cumulative disbursement under the programme to N1.01tn, disbursed to over 4.2 million smallholder farmers cultivating 21 commodities across the country.”
In its amended Anchor Borrowers’ Programme Guidelines for September 2021, the CBN’s Development Finance Department stated that insurance coverage should be given under the plan.
According to the instructions “Provide insurance cover for the projects; ensure fast processing and settlement of claims; provide technical advice to farmers on insurance policies; and monitor projects for early warning signals or red flags.
“Render periodic reports on-farm conditions; serve as member of the project management team; and carry out any other responsibilities as may be prescribed by the CBN from time to time.”
The updated rules took into account current realities and advancements in the ABP, with the goal of fostering best practices in program execution.
Smallholder farmers, the ABP transaction dynamics, and the project management team in the implementation phase were all recognized in the publication.
The recommendations, according to the CBN, are aimed at strengthening the program’s implementation process and increasing stakeholder participation in order to achieve the ABP’s goal.
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