The overall availability of credit to the corporate sector increased in second quarter of 2020, according to the credit conditions survey report of the Central Bank of Nigeria (CBN).
The survey showed that lenders reported increased demand for corporate credit from all firm sizes in Q2 2020 and expect demand to rise further in Q3 2020.
Corporate loan performance also improved across all sizes of firm except small business and medium private non-financial corporations (PNFCs) in Q2 2020, according to the report that was posted on the website of the apex bank yesterday.
The increase was driven by changing sector-specific risks, changing economic conditions, changing appetite for risk, tight wholesale funding condition and market share objectives.
Lenders reported that the prevailing commercial property prices positively influenced credit availability for the commercial real estate sector in Q2 2020 and would continue in Q3 2020. Similarly, the prevailing commercial property prices are expected to positively influence secured lending to PNFCs inQ2 and Q3 2020.
On the other hand, demand for total unsecured loan from households increased in the period under review, a trend that is expected to expand in the Q3 2020.
The survey reported that creditors have resolved to tighten the credit scoring criterion with a focus on decreasing the proportion of approved unsecured loan applications in Q2 2020.
Lenders reported that while spread on credit card lending narrowed, the spread on unsecured approved overdrafts/personal loans widened and overall unsecured lending narrowed in Q2 2020.
However, they expect the spread on unsecured approved credit card lending, overdrafts/personal loans and overall unsecured lending to narrow in Q3 2020
Similarly, supply of secured credit to households increased in Q2 2020 and is expected to increase in the Q3 2020. The “Changing appetite for risk” was the major factor for the increase in supply of secured credit, it stated.
Secured loan performance, measured by default rates, improved in the review period, lenders however expect higher default rates in Q3 2020.The performance of total unsecured loan to households, measured by default rates, improved in Q2 2020 but it is expected to deteriorate in Q3 2020.
Lenders also reported that the overall spread on secured lending rates on approved new loans to households relative to MPR narrowed in Q2 2020 and is expected to further contract in Q3 2020.The overall spread on unsecured lending narrowed in Q2 2020 and were expected to decline further in Q3 2020.
On the flip side, request for secured lending for house purchase increased in Q2. The proportion of secured loan applications approved decreased as lenders tightened the credit scoring criteria.