…debunks report on payment of overseas tuition fees
Banks’ credit to the private sector rose by 18.93 per cent( N6.08trillion) to N38.2trillion in May 2022, from N32.1trillion in the corresponding period of last year, latest data released by the Central Bank of Nigeria (CBN) shows. New Telegraph’s analysis of the “Money and Credit Statistics” released by the apex bank, yesterday, indicates that compared with the April 2022 number (N37.68trn), credit to the private sector last month increased by N514.94billion. Similarly, the data shows that net domestic credit rose to N56.5trillion in May 2022 from N44.7trillion in the corresponding period of the previous year.
It also increased by N1.7trillion when compared with N54.8trillion in April 2022. Furthermore, the data shows that net credit to government rose to N18.3trillion in May 2022 from N17.1trillion in the previous month. However, according to the CBN data, Currency Outside Banks (COB) dropped to N2.7 trillion in May 2022 from N2.8trillion in the preceding month. Analysts note that there has been a significant increase in bank credit to the private sector in recent years, a development they ascribe to the policies that the CBN introduced to encourage Deposit Money Banks (DMBs) to increase lending to the private sector as part of its efforts to boost economic growth. Analysts particularly cite the apex bank’s announcement, in July 2019, increasing the required minimum Loan-to-Deposit Ratio (LDR) to 60 per cent effective end of September 2019.
It later raised the ratio higher to 65 per cent which lenders were expected to comply with by the end of December the same year. New Telegraph’s findings show that the LDR policy resulted in total credit to the private sector rising by over N4trillion between March 2020 and December 2021. In a report it issued in December, one of the big three credit rating agencies in the world, Standard and Poor’s (S&P), predicted that private sector credit in Nigeria would range between 15 and 18 per cent of the country’s Gross Domestic Product (GDP) before 2023.
The rating agency estimated that banking sector loan growth would average around 20 per cent through 2023, while the sector’s Non- Performing Loan (NPL) ratio was expected to increase to seven per cent in 2021, compared with a reported 5.7 per cent in June 2021. It noted that Nigeria’s private sector leverage was low in absolute terms, stating that compared with peers, loan growth would reflect the renewed impetus stemming from banks’ digital transformation and greater focus on retail lending as well as weakening naira.