Banking industry credit to the private sector increased by 3.14 per cent within one month from N41.754 trillion in February this year to N43.066 trillion at the end of March, a situation analysts say is due to improved economic conditions in the country.
This is as net credit to the government declined by 3.17 per cent from N28.431 trillion in February to N27.529 trillion at the end of March 2023.
Banks had begun to increase lending to the private sector as the effects of the cash crunch waned in the country, increasing the level of credit to the sector by 18.1 per cent compared to N36.47 trillion that was recorded at the end of March 2022.
According to analysts at Cordros Research, the increase in the credit to the private sector “reflects the impact of improved domestic macroeconomic conditions and CBN-led interventions on the real sector.
“We expect that the improvement of domestic economic activities will drive the willingness of commercial banks to create risky assets. Also, we expect the CBN to maintain its intervention programme s at a steady pace as the economy expands. Conclusively, we predict that the Credit to Private Sector (CPS) will maintain a double-digit expansion in 2023 full year.”
Meanwhile, currency outside of banks increased by 71.4 per cent between February and March as the CBN increased output of cash to ease the cash crunch in the system. Data showed that currency outside of banks soared from N843.311 billion to N1.445 trillion.
Similarly, currency in circulation increased to N1.68 trillion in March from N982.09 billion in February although it is a 48.1 per cent year on year decline, highlighting the effects of the CBN’s currency redesign.
According to analysts at Cordros Research, the “policy resulted in a temporary reduction in the amount of money in circulation as people were required to exchange their old banknotes for new ones.”
