N1.6trn new loans: MPC members identify most favoured sectors

THE Members the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) have identified certain sectors of the Nigerian economy that benefited most from increased lending as a result of the new lending directive of the apex bank.

In their personal statements from the November 2019 MPC meeting, Mrs Ahmed Aisha N., Adenikinju Adeola Festus and Adamu Edward Lametek observed that the Loan to Deposit Ratio (LDR) policy has continued to be very successful, adding N1.060 trillion in loans to the private sector between end May 2019 and end September 2019 and over N1.6 trillion in new loans to the economy since it was first pronounced in July 2019.

According to the members, monetary aggregates provided by bank staff validate the impact of increased lending and reduction in credit to government and clearly show growth in consumer credit.

“Significant portions of the new credit went to manufacturing (N459.69 billion), the highest in two decades, consumer loans (N356.65billion), general commerce (N142.98 billion), information and communications (N82.07 billion), construction (N74.52 billion), agriculture, forestry and fishing (N73.20 billion),  mining and quarrying (N3.64 billion) and transportation and storage (N3.09 billion), amongst others,” they agreed in their separate statements.

In addition to credit to the private sector, which has helped spur growth in the third quarter (Q3) 2019, the LDR policy created a number of other positive effects.

The members said, renewed focus on lending by banks has created competitive pressure, which is driving a reduction in market lending rates, enhancing affordability and creating demand for loans.

The new credit has been primarily in manufacturing, agriculture and consumer lending, which is helping to diversify bank credit portfolios which have hitherto been heavily concentrated in oil and gas.

One of the members observed that contribution of oil and gas reduced to 27.4 per cent of total loans and manufacturing grew to 16.0 per cent (end October 2019) from 30.41 and 14.68 per cent, respectively (end December 2018).

The reduction in credit to oil and gas and FGN Payments of outstanding obligations in this sector is also helping to reduce risk as the sector NPLs reduced from 20.76 to 5.39 per cent of industry NPLs from end October 2018 to end October 2019.

Another member, Folashadun Shonubi also observed that the financial system indicators (FSI) trend was generally positive. The NPLs was particularly encouraging, he stated.

NPLs ratio declined from 9.4 per cent in August 2019 to 6.6 per cent in October 2019. “It is hoped that the trend will continue. Total operating cost to operating income of banks also declined from 67.4 per cent in August 2019 to 66.9 per cent in October 2019, suggesting more efficiency in their operations,” said.

Loans and advances as share of banks’ assets rose by 2 percentage points from 33 per cent to 35 per cent between May and October 2019.