The Central Bank of Nigeria’s (CBN) Financial Stability Report for the month of December 2014, shows that the volume of consumer credit by banks improved during the second half of 2014.
Available data indicate that aggregate outstanding consumer credit stood at N848.77 billion at the end of the review period, compared with N809.8 billion at end June 2014. This reflected an increase of 4.81 percent, compared with 3.49 percent at the end of the first half of 2014.
As a ratio of total credit to the core private sector, consumer credit constituted 4.88 percent, compared with 4.49 percent in the first half of 2014.
The development could be attributed, largely, to the impact of the recent decision not to remunerate standing deposits facility (SDF) in excess of N7.5 billion. The rising consumer credit could enhance the effectiveness of monetary policy transmission.
The upward trend in the amount of credit extended to the private sector continued during the second half of 2014. Available data indicate that total credit to the various sectors of the economy grew significantly by 16.62 percent to N12,629.99 billion, compared with 7.86 percent and 13.88 percent growth recorded in the preceding half year and the corresponding period of 2013, respectively. The oil and gas sector continued to attract the highest share of total credit as it accounted for 25.70 percent, compared with 24.33 percent in the first half of 2014, while the manufacturing sector accounted for 13.15 percent of the total credit, the same level as in the preceding half year. Agriculture, forestry and fishing category accounted for 3.96 percent of the total credit, indicating a 0.12 percentage point increase over the 3.84 percent recorded in the preceding half year.
The structure of bank credits in the second half of 2014 indicated the continued dominance of loans and advances of short-term maturities, although with a slight improvement over the position in the preceding half year. Credits maturing within one year accounted for 49.59 percent, compared with 56.6 percent at the end of the first half of 2014. The medium-term (≥1yr and <3yrs) and long-term (3yrs and above) maturities stood at 19.50 percent and 30.91 percent, compared with 16.80 percent and 26.60 percent, respectively, at the end of the first half of 2013. The increase in the proportion of credits with both medium-and long-term maturities may be attributed to the effects of various policies of the bank to de-risk the real sector and encourage banks to grant loans of medium- to long-term maturities.
Similarly, deposits of less than one-year maturity constituted 96.31 percent (of which 73.69% had maturity of less than 30 days), compared with 95.60 percent at end-June 2014.
Further analysis shows that the medium- and long-term deposits constituted 2.69 percent and 1.00 percent, compared with 3.40 percent and 1.00 percent at end-June 2014, respectively.
Notwithstanding the slight improvement in the proportion of credits with medium- and long-term maturities during the second half of 2014, the dominance of short-term maturities in deposits of banks continued to be a major constraint to their capacity to grant long-term credit. There is also the challenge that this development might result in liquidity and re-pricing risks.
However, continuous implementation of the various policies by the bank to de-risk and encourage lending to the real sector, as well as the curtailment of inflationary pressures to ensure sustained general price stability is expected to further improve medium- to long-term lending.
