As the total banking sector gross credit to the Nigerian economy rises to N30.64 trillion, members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) have highlighted key drivers of the growth in credit.
According to them, this was due to the increase in the industry funding base, the CBN’s directive on Loan-to-Deposit Ratio (LDR) and business strategy and competition.
The MPC met on May 23 and 24, 2023, confronted with persisting and emerging risks to both the global and domestic economies.
Information gleaned from their personal statements released on Friday show that the credit growth was largely recorded in key sectors of the economy, including oil and gas, manufacturing, general commerce and government.
In their separate statements, Kingsley Obiora and M.O Omamegbe agreed that non-performing loans (NPLs) ratio in the industry declined to 4.4 percent in April 2023 from 5.3 percent in March 2022, further below the maximum prudential requirement of 5.0 percent.
According to them, the continuous decline in NPLs was attributable to write-offs, restructuring of facilities, Global Standing Instruction (GSI) and sound credit risk management.
“Consequently, total gross credit increased by N4.54 trillion, representing an increase of 19.71 percent between the end of April 2022 and the end of April 2023, from N26.10 trillion to N30.64 trillion due to the increase in the industry funding base, the CBN’s directive on Loan-to-Deposit Ratio (LDR) and business strategy and competition.
“Overall, inflation is proving persistent and the MPC must continue to act to bring it down and ensure inflation expectations stay well anchored. Inflation is fast eroding the real income of the most vulnerable households and is detrimental to stable and inclusive growth,” Obiora submitted.
Therefore, based on the need to restore price stability, sustain the growth recovery, anchor inflation expectations, minimise the effect of exchange rate pass-through to domestic prices, and be credible and consistent, he voted to raise the Monetary Policy Rate (MPR) by 50 basis points.
Monetary policy, according to Omamegbe, should therefore aim to anchor inflation expectations as a key priority and the CBN should stay focused on its policy tightening stance as a premature easing of policy tightening will require more painful and difficult choices later.
Furthermore, meticulous management of the money supply is of importance to forestall the recent increase in currency in circulation from fuelling inflationary pressures.
“In essence, by remaining steadfast in its pursuit of inflation control, factoring in the lags in policy transmission and implementing astute currency management strategies, the bank can contribute significantly to the attainment of price stability, the stimulation of sustainable economic growth and the preservation of the nation’s economic prosperity,” Omamegbe emphasised.
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