MPC members endorse LDR policy as gross credit grew to N16.23trn

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has endorsed the Loan to Deposit Ratio (LDR) threshold stipulated by the apex bank for all Deposit Money Banks (DMBs).

This is even as Gross credit grew five per cent on average from N15.44 tri llion at end June 2019 to N16.23 trillion on September 13, 2019.

The committee recognises this as the highest figure in 19 months, even as the banks did not compromise their asset quality (industry NPLs remained flat at 9.4 per cent).

According a member of the committee Ahmad Aishah, Bank staff reports clearly indicate marked progress with the LDR Policy, introduced in July which prescribed minimum loan to deposit ratios for banks over a three-month period.

Ahmad, Shonubi Folashodun, Balami Dahiru Hassan, Sanusi Aliyu Rafindadi among others agreed that significant portions of the new credit were channelled into key sectors like manufacturing, retail and commerce as well as agriculture.

The MPC met on September 19 and 20, 2019, in the light of softening global growth and weaker-than-anticipated domestic output recovery.

In their personal statements available on CBN website over the weekend, the members suggested that this brightens the prospects for output expansion, creating much needed growth momentum for the rest of the year

Available data shows signs of a significant improvement in credit flows to the private sector. Total credit to the private sector increased by about 2.7 percentage points from 6.97 per cent in July 2019 to 9.36 per cent in August 2019.

At an annualised rate of 14.05 per cent, it is about 0.44 per cent short of the provisional benchmark of 14.49 per cent for the year

2019.

Credit to the Core Private Sector also increased to 10.55 per cent in August 2019 from 7.55 per cent in July 2019.

Tgey noted that as a result of the new regulatory measures to improve lending to the real sector, available CBN data shows that gross lending has increased by N610 billion between the end of May and September 13, 2019, representing 3.9 per cent increase.

The distribution of this increased lending appears to be in the desired direction as lending to Manufacturing recorded the highest increase (N194.88 billion), followed by general retail and consumer lending (N122.33 billion, then commerce and agriculture (with N107.6 and 70.61 respectively).

The members further observed that between the end of May 2019 and end of June 2019, credit to agriculture, Manufacturing and general (consumer and retail) increased by 11.16 per cent, 13.99 per cent and 68.74 per cent respectively.

Reports show that the banking industry remains sound and has recorded a significant reduction in Non-Performing Loans (NPLs), which is now 9.4 per cent. The new policy measures, including the introduction of Global Standing Instruction (GSI), are expected to help sustain the declining trend in the NPLs, they hoped.

“The economy continued to enjoy the benefit of relatively stable exchange rate and rebound in non-oil exports, though the external sector remained challenged by heightened uncertainties in the international oil market and trade tensions.

On account of sustained supply management by the CBN, the exchange rate remained relatively stable. This moderated the impact of challenges to the balance of payment and external reserve accretion, from volatile oil market and decline in global international trade,” one of the members stated.