The Central Bank of Nigeria (CBN) revealed that credit to the private sector increased from 498.6 billion naira in August to 33.26 billion naira, compared to 32.8 trillion naira reported in July 2021.
The figure of 33.3 trillion naira announced by the CBN is a new record that has been fueled by banks, among others the increase in lending to the real sector.
The CBN in its currency and credit statistics for the period revealed that credit to the private sector in January was N30.65 trillion and fell 0.47% to N30.5 trillion in February.
However, in March it closed at 31.44 trillion naira and crossed the 32.1 trillion naira mark in April at 32.12 trillion naira.
In addition, the CBN declared 32.63 trillion naira and 33.36 trillion naira in loans to the private sector in May and June respectively.
Analysts believe that bank lending to the real sector played a critical role in Nigeria’s recent gross domestic product (GDP) increase.
Economist and CEO of BIC Consultancy Services, Dr Boniface Chizea said he was optimistic that banks credit the real sector, despite severe challenges, producing positive results.
According to him, âthe volume of credit which seems enormous will produce the expected dividends despite an investment environment perceived as inhospitable. We must therefore remain confident and hope that the desired impact must be felt, if not immediately, then in due course.
âWe must also accept the fact that we would be called upon if we wanted to isolate the direct impact of credit on the economy. So we have to be assured that credit is not wasted money. “
For his part, economist and private sector advocate Dr Muda Yusuf TODAY said the growth in credit to the private sector is commendable.
He noted that the impact would depend on sector allocation, credit quality, duration of funds and interest rate.
Yusuf said, âI guess a significant percentage of this amount went to large companies, multinationals and high-end mid-sized companies. The CBN has made a lot of agricultural loans, but the quality of the loans is an issue. Reports indicate high default rates in agricultural credit, especially the regime of key borrowers.
âMonetary intervention is imperative for a real development of the sector. But it is not enough to guarantee the desired results of growth and productivity. The context in which businesses operate is as important, if not more, than financing. The entire investment environment must be conducive to sustainable development of the real sector.
He added, âTherefore, to complement credit to the private sector, other factors to be reckoned with include the quality of infrastructure, especially electricity, roads and railways. There are also issues related to the quality of the regulatory environment, the exchange rate policy regime, the port situation, the volatility of the naira exchange rate, the fiscal environment and the security situation.
âThese are not things that monetary intervention can solve. It takes a hard-hitting fiscal policy intervention to resolve these issues. Some of the problems relate to the economic reforms that need to be put in place. Commitments between private sector stakeholders and policy makers are essential to achieve sustainable development of the economy.
Governor, CBN, Mr. Godwin Emefiele had in his statement at the end of the August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the loan-to-deposit ratio (LDR) in 2019.
According to him, âGross credit to industry increased by 6.63 trillion naira, from 15.57 trillion naira at the end of May 2019 to 22.20 trillion naira at the end of July 2021. Credit has been widely recorded in the manufacturing, oil and gas, and agricultural sectors.
He added that MPC members have noted the unequivocal importance of credit growth for the sustained recovery of production and moderation of price developments as supply improves.
âHe therefore called on the Bank to maintain adequate supervision of the banks to ensure compliance with its current credit policy, while ensuring that they are not unduly exposed to credit risks.
“The Committee also noted the relevance of the Bank’s series of interventions for the entire credit system, urging its continued use to finance sectors with high capacity for job creation,” he said. .