Banks’ total loan to the Nigerian economy increased by N3.3tn in June 2020, despite the coronavirus pandemic.
According to information contained in the monetary policy communique of the Central Bank of Nigeria, banks’ aggregate domestic credit grew by 5.6 per cent in June 2020 compared with 7.7per cent growth recorded in May 2020.
This resulted in a total increase in gross credit from N15.56tn in May to N18.9tn as of end of June 2020. The CBN attributed the increase to its Loan to Deposit Ratio initiative, a policy that forces banks to lend at least 65 per cent of its deposits.
“Aggregate domestic credit (net) grew by 5.16 per cent in June 2020 compared with 7.47 per cent in May 2020. The Committee commended the CBN Loan-to-Deposit Ratio (LDR) initiative to address the credit conundrum as the total gross credit increased by N3.33tn from N15.56tn at end-May 2019 to N18.90tn at end-June 2020,” said CBN.
The MPC revealed that most of the loans went to the manufacturing, consumer credit, general commerce, information and communication and agriculture sectors.
According to the document, the CBN favours credit deployment to these sectors which it considers productive. Data from the financial sector revealed that most of the banking sector’s credit went to the oil and gas sector with the “productive sectors” (as defined by the CBN) falling behind.
Commercial banks have been hesitant to lend to the sectors due to its high rate of non-performing loans. Banks recorded an aggregative non-performing loans (specific provisions) of 6.5 per cent as of December 2019.
Sectors like the Agriculture sector saw their non-performing loans spike by over 40 per cent last year.
The construction and education sector also recorded significant increase in non-performing loans in 2019 compared to 2018. In general, total non-performing loans dropped from N1.78tn in 2018 to just over one trillion in 2019.
