Bank credits to the private sector rose by about N2.3 trillion between June and July 2024, underlying the resilience and continuing support of banks for the economic growth of the country.
A comparative data on credit to the private sector showed a 34 per cent increase from N56.46 trillion in July 2023 to N75.5 trillion in July 2024, representing an increase of about 34 per cent over the past year.
Latest data on credit to the private sector (CPS) obtained from the Central Bank of Nigeria (CBN) indicated that banks’ loans and other facilities to the private sector have increased by nearly a third, underlying the resilience and support of the banking sector to the economy.
The report showed that CPS rose by 33.7 per cent to N75.48 trillion in July 2024 as against N56.46 trillion recorded in July 2023, an increase of N19.02 trillion.
A breakdown indicated that CPS increased by 3.1 per cent or N2.29 trillion to N75.48 trillion in July 2024 compared with N73.19 trillion in June 2024.
The CPS includes; loans, trade credits and other account receivables and supports provided by banks to the private sector within a period. The CPS is a global measure of the banking sector’s balance sheet resilience and contribution to the national economic agenda.
The latest report underlined the continuing growth in banks’ operations and deployment of funds to the productive sector of the economy.
A report by the CBN showed that Nigerian banks had seen a significant increase in deposits during the first half of this year. The report indicated that banks’ demand deposits rose from N26.7 trillion recorded at the end of December 2023 to N33.0 trillion by June 2024.
Banks had sustained steady growth in deposits across the quarters. Total demand deposits in the first quarter ended March 2024 had risen by 8.1 per cent to N28.9 trillion. In the second quarter ended June 2024, banks’ deposits increased by 14.3 per cent to N33 trillion.
Experts said banks are in position to continue to create more loans, citing aggressive growth strategies by banks and enabling a regulatory environment.
Analysts agreed that increasing private sector credit implies a major boost for the economy as there is a link between credit to the private sector and economic growth. Several studies have continuously found that increased lending by banks directly leads to increase in Gross Domestic Products (GDP).
Analysts at Cordros Capital said the trend in credit to the private sector may continue in the period ahead.
“We believe the reinforcement of the CBN’s limit on Deposit Money Banks loans-to-deposits macro-prudential ratio will continue to drive the willingness of commercial banks to create risky assets over the short to medium term,” Cordros Capital stated.
Managing director, Arthur Steven Asset Management, Olatunde Amolegbe, said the growth in credit to the private sector could be attributable to increase in economic activity. He, however, pointed out that other factors such as inflation and devaluation could moderate such increase.
Director/CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said, the credit outlook remains cautious, calling for expansive distribution of credits across all tiers of companies and sectors.
According to him, there are major concerns in terms of distribution of credits across sectors and companies with small businesses, which contribute more to job creation and economic inclusion, not likely to benefit much.
He noted that, banks tend to be wary of credit risk concerns associated with lending to small businesses and certain sectors, adding that efforts should be made to drive inclusive and stable credit access to all sectors including growth and employment elastic sectors such as agriculture, manufacturing, real estate, mining and construction among others.
Governor of CBN, Dr. Olayemi Cardoso said the ongoing recapitalisation would strengthen banks further to drive the $1 trillion national economic target and support stable growth in the economy.
According to him, additional capital would not only provide a substantial buffer for banks against potential economic challenges, but enhance Nigeria’s banks capability to support massive economic growth and play competitively globally.
Experts agreed that considering the increasing changing dynamics in the banking sector and the overall economy since the last recapitalisation, it has become necessary to strengthen the banks’ financial positions.
