The Nigerian banking sector’s credit to the private sector rose by N4.1tn or 13.8 per cent between September 2020 and September this year.
The CBN’s money and credit statistics report showed that in September 2020, bank’s credit to the private sector stood at N29.7tn but rose to N33.8tn in September this year.
In October 2020, the sector’s debt to banks fell to N29.1tn, but climbed by N300bn to N29.4tn in November.
The total value of credit provided by banks to the sector rose to N30.4tn in December and N30.6tn in January 2021 but fell by N100bn in February to N30.5tn.
Lending to the private sector rose to N31.4tn in March, N31.9tn in April, N32.1tn in May and N32.6tn in June.
The credit to private sector rose from N32.8tn in July to N33.4tn in August.
In a bid to drive lending to the real sector, the CBN had in 2019 directed all banks to maintain a minimum of 65 per cent Loans-to-Deposit Ratio by the end of December 2019.
The apex bank had noted that the improvement in lending to the real sector followed the introduction of the 65 per cent LDR.
In his personal statement at the last meeting of the Monetary Policy Committee of the CBN in September, a professor of Economics, University of Ibadan, Adeola Adenikinju, said many sectors of the economy and households benefitted from the increased credit.
“The various interventions by the central bank is providing a boost to personal consumptions and economic growth,” he added.
The Deputy Governor, Economic Policy, CBN, Kingsley Obiora, also attributed the rise in credit to private sector to the LDR policy.
He said, “The increased credit was recorded in manufacturing, consumer credit, general commerce, information and communication and agriculture.
“The credit growth was driven by the LDR policy, the extension of regulatory forbearance and other macro prudential measures.”
An economist and Senior Lecturer of Economics at the Pan Atlantic University, Dr Olalekan Aworinde, said while the rise in credit to the real sector was commendable, significant impact and growth in the sector would be reliant on how the funds provided were utilised.
He explained that allowing the sector to bear the cost of basic infrastructures such as roads and electricity would significantly deplete the funds available for production.
He, therefore, called on the government to support the interventions of the banking sector by providing critical infrastructure and implementing interventions in the private sector.
Aworinde said, “If you look at the credit to private sector, you will understand that the banks provide these loans to them to boost output.
“The issue there is that the credit is important, but what the funds are used for is most important. Looking at the private sector, majority are high-cost producers – meaning that majority of these firms have to provide their own roads, electricity and water.
“When all these infrastructures are not in place, you will discover that you will see little impact in the sector. So, in a nutshell, the growth is a step in the right direction but the spending pattern of those who receive the credit and the interest rate of these loans are critical.”
Meanwhile, credit to the government rose by N3.43tn within the same period.
The banking sector’s credit to the government rose from N9.6tn in September 2020 to 13.03tn in September 2021, according to the CBN.