Steady Growth in Private Sector Credit Extension in April 2021


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Lending
to the private sector has increased at a double-digit rate y/y since August ’19
although there are signs of slowing momentum. It expanded by 10.6% y/y in
April, to NGN31.82trn (USD77.6bn). This series covers lending from all sources
including the CBN and the state-owned development banks. The decent growth in
this measure of private-sector credit extension (PSCE) is the result of the
tightening by the CBN of its loans-to-deposits ratio for commercial banks to
60% as at September ’19 and 65% three months later. There is still far to go in
boosting financial intermediation when we consider the scale of the unbanked
informal economy. Nigeria’s PSCE/GDP ratio was just 19.8% at end-2020, which
helps to explain, inter alia, the paucity of tax collection and the bluntness
of monetary policy.

A separate CBN series in the Quarterly
Statistical Bulletin shows the allocation of credit by deposit money banks
(DMBs). This gives us a total of NGN20.37trn. The large difference of more than
NGN11trn with the fuller measure owes a little to the passage of time. The main
explanation lies, however, in the extension of credit by the CBN in its
development finance role.



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