Nigerian lenders reported an increase in the availability of secured credit to households in the first quarter, driven by favourable economic outlook and higher appetite for risk.
The Central Bank of Nigeria (CBN) on Thursday released the manufacturing sector’s Purchasing Managers Index, which stood at 56.7 index points in the month of March, indicating expansion in the manufacturing sector for the twelfth consecutive month.
The report revealed that production level, new orders and inventories growing at a faster rate, and supplier delivery time and employment level growing at a slower rate in March 2018.
The CBN also released the credit condition survey Q1 2018, report conducted from February 19 to 23, 2018. The CBN conducts quarterly survey of banks’ lending to understand trends and developments in credit conditions.
Banks were asked about trends and developments in credit conditions in the current and next quarters. The survey covers secured and unsecured lending to households, lending to public non-financial corporations (PNFCs), small businesses and other nonfinancial corporations (OFCs). The survey serves as an input into the Monetary Policy document, which presents the bank’s assessment of the latest trends in lending to the Nigerian economy.
The Q1 2018 overall credit condition survey for households, small businesses and corporate entities indicated an increase in availability of secured credit but a decrease in the availability of unsecured credit.
They noted that favourable economic outlook and higher appetite for risk were major factors behind the increase. Availability of secured credit was expected to increase in the next quarter, with higher appetite for risk and favourable liquidity positions as the likely contributory factor.
The overall availability of credit to the corporate sector increased in Q1 2018 and was expected to increase in Q2 2018. This was driven by brighter economic outlook, changing sector-specific risks, changing appetite for risk, tight wholesale funding conditions and market share objectives. Lenders reported that the prevailing commercial property prices negatively influenced credit availability of the commercial real estate sector in the current quarter.
Similarly, lenders expected the prevailing commercial property prices to negatively influence secured lending to Public Non-Financial Corporations (PNFCs) in the current quarter.
According to the report, Changes in spreads between bank rates and MPR on approved new loan applications for all business sizes widened in Q1 2018, and were expected to widen for all business sizes except for small businesses in Q2 2018.
The proportion of loan applications approved for all business sizes increased in the current quarter, and is expected to further increase in Q2 2018.
Lenders required stronger loan covenants from large PNFCs and OFCs, but lesser loan covenants from small businesses and medium PNFCs in the current and next quarters.
