By Collins Nweze
Credit to the domestic economy has risen by N774.28 billion, the Central Bank of Nigeria (CBN) has said.
The credit uptick followed increased pressure by the CBN on banks to maintain a minimum of 65 per cent Loan-to-Deposit Ratio (LDR). Banks that fail to comply with the policy are charged additional Cash Reserve Ratio (CRR) equal to 50 per cent of the lending shortfall of the target, which the apex bank reviews regularly.
The CRR is 27.5 per cent of banks’ deposits kept with the apex bank at zero interest to curb money supply and check inflation.
Findings showed CBN had set up a special CRR team to monitor banks’ CRR once a month, and provide default list to the regulator for sanctions.
Report by the CBN-led Monetary Policy Committee (MPC) posted on the apex bank’s website showed aggregate domestic credit rose by 13.40 per cent in December 2020, compared with 9.48 per cent in the previous month.
It attributed the credit uptick to the CBN’s LDR policy, complemented by its interventions in various sectors of the economy and called for a sustained drive to improve access to credit to the private sector and other critical sectors of the economy.
According to the report, the banking sector gross credit within the period stood at N25.02 trillion compared with N24.25 trillion at the end of November 2020, representing an increase of N774.28 billion.
Further analysis of the CBN long-term real sector interventions and credit expansion showed that the Anchor Borrowers Programme (ABP) has led to the disbursement of N554.63 billion to 2,849,490 beneficiaries since the inception of the programme, of which N61.02 billion was allocated to 359,370 dry season farmers.
The apex bank has also in light of the on-going synchronised efforts by the monetary and fiscal authorities to mitigate the impact of the COVID-19 pandemic, committed a substantial amount of money towards this objective.
The COVID-19 Targeted Credit Facility (TCF) meant for household and small businesses, N192.64 billion has been disbursed to 426,016 beneficiaries; N106.96 billion to 27,956 beneficiaries under the Agri- Business Small and Medium Enterprises Investment Scheme (AGSMEIS).
In the Health Care Support Intervention Facility, N72.96 billion was disbursed to 73 areas that comprise 26 pharmaceutical projects and 47 Hospitals and Health Care Services Projects in the country.
Senior Director for Europe, Middle East and Africa bank ratings at Fitch Ratings, Mahin Dissanayake, said the CBN has been highly interventionist.
“Where peers like South Africa and Kenya followed the global trend of giving banks more room to lend, Nigeria hasn’t budged. Instead, it stuck with a CRR that compels lenders to park keep a portion of their deposits with the regulator. Failure to meet the threshold results in the regulator debiting banks’ accounts with the shortfall,” Fitch report on CRR said.
Analysts at Afrinvest West Africa Limited, predicted that the level of Non-performing Loans (NPLs) in the banking sector was expected to rise between 2021 and 2022 due to the expanded lending.
They said: “We expect that the NPLs will rise between 2021 and 2022, and the CBN is even trying to recapitalise the banks to enable them to absorb the likely shock from the NPLs rise. As the banks do more lending, they are also aware that the risks are still very high, as much as possible.
“Still, some banks are not willing to take any form of risk due to their past experiences,”
The MPC had in January last year raised the CRR by five per cent to 27.5 per cent. It explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.
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