Nigerian Banks’ Private Sector Loans Surge to N74.31tn
Nigerian banks’ loans and support for the private sector soared to approximately N74.31 trillion by the end of May 2024, according to data released by the Central Bank of Nigeria (CBN).
The latest figures indicate a significant 65.9% increase in credit to the private sector, up by N29.52 trillion from N44.79 trillion in the same period of 2023. This trend highlights the banking sector’s escalating support for the nation’s economy.
Credit extended to the private sector by banks encompasses loans, trade credits, and other receivables. In April, this credit stood at N72.92 trillion, and in March, it was N71.21 trillion. February witnessed the highest contribution at N80.86 trillion, followed by N76.48 trillion in January 2024.
This surge in credit is complemented by a recent report on capital importation into Nigeria, which underscores the banking sector’s robust performance. The National Bureau of Statistics’ capital importation report for Q4 2023 revealed that Stanbic IBTC Bank, Citibank Nigeria, and Rand Merchant Bank facilitated $1.09 billion in capital imports during this period. The report showed a 2.62% rise in Nigeria’s capital inflow to $1.09 billion from $1.06 billion in the same quarter the previous year.
The production and manufacturing sector attracted the highest capital inflow, totalling $450.11 million, which accounts for 41.35% of the total capital imported in Q4 2023. The banking sector followed with $283.30 million (26.03%), and financing with $135.59 million (12.46%).
Analysts at Cordros Capital predict that the CBN’s reinforcement of the loans-to-deposits macro-prudential ratio for Deposit Money Banks will continue to incentivise commercial banks to create risk assets.
A study by the International Monetary Fund (IMF) on ‘Balance Sheet Strength and Bank Lending During the Global Financial Crisis’ highlighted the importance of strong bank balance sheets in maintaining lending during economic downturns. The study found that banks with robust balance sheets were better equipped to sustain credit supply, while those more reliant on market funding and with lower structural liquidity curtailed lending more significantly. The IMF report underscores the role of high-quality capital in mitigating these effects, supporting regulatory proposals under the Basel III framework.
CBN Governor, Dr. Olayemi Cardoso, noted that the ongoing recapitalisation efforts would further fortify banks, enabling them to drive the $1 trillion economic target and sustain stable growth. He emphasised that additional capital would not only buffer banks against economic challenges but also enhance their capacity to support significant economic expansion and compete globally.
