Nigerian banks have significantly increased their support for the private sector with loans and other forms of credit to the tune of N375.78 trillion in the first five months of 2024.
This represents a 74.98% rise from the N214.76 trillion recorded in the same period last year, according to the Central Bank of Nigeria (CBN).
The data from the CBN highlights a consistent growth in credit to the private sector, underscoring the banking sector’s critical role in driving economic stability and expansion.
This surge in private sector support includes loans, trade credits, and other account receivables, illustrating a robust and dynamic banking sector committed to bolstering the national economic agenda.
A closer examination of the figures reveals that credit to the private sector climbed by 65.9%, or N29.52 trillion, to reach N74.31 trillion in May 2024, compared to N44.79 trillion in the corresponding period of 2023.
The monthly breakdown showed that April’s credit stood at N72.92 trillion, while March and February recorded N71.21 trillion and N80.86 trillion, respectively.
February’s figures marked the highest contribution within this period, followed closely by January’s N76.48 trillion.
This significant increase in private sector credit comes on the heels of a recent report on capital importation, indicating that Nigerian banks are attracting substantial foreign investment.
According to the National Bureau of Statistics, capital importation into Nigeria rose by 2.62% to $1.09 billion in the fourth quarter of 2023, up from $1.06 billion in the previous year.
Leading this charge were Stanbic IBTC Bank, Citibank Nigeria, and Rand Merchant Bank, which facilitated the highest levels of capital importation.
The production and manufacturing sector emerged as the largest beneficiary of capital inflow, receiving $450.11 million, or 41.35% of total capital imported in Q4 2023.
The banking sector followed with $283.30 million (26.03%), and the financing sector with $135.59 million (12.46%).
Financial experts at Cordros Capital have attributed this upward trend to the CBN’s reinforcement of the loans-to-deposits macro-prudential ratio for Deposit Money Banks.
This regulation encourages banks to maintain a healthy balance between deposits and loans, fostering a stable financial environment conducive to lending.
An International Monetary Fund (IMF) study on bank balance sheet strength during financial crises found that banks with robust balance sheets were better positioned to maintain lending during economic downturns.
This finding underscores the importance of strong capital buffers, which the CBN Governor, Dr. Olayemi Cardoso, has emphasized in the ongoing recapitalization efforts aimed at strengthening Nigerian banks to support the country’s ambitious $1 trillion economic target.
Dr. Cardoso stated, “Additional capital not only provides a substantial buffer for banks against potential economic challenges but also enhances their capability to support massive economic growth and compete globally. The ongoing recapitalization will empower our banks to drive sustainable growth and achieve our national economic goals.”