Deposit money banks’ credit to the corporate sector is expected to rise in the first quarter of 2018 according to the Central Bank of Nigeria (CBN).
In the credit condition survey report released by the CBN, the overall availability of credit to the corporate sector increased in fourth quarter of 2017.
This was driven by brighter economic outlook, market share objectives, favorable liquidity conditions and tight wholesale funding conditions. Lenders reported that the prevailing commercial property prices negatively influenced credit availability of the commercial real estate sector in the current quarter. Similarly, lenders expect the prevailing commercial property prices to negatively influence secured lending to Public Non- Financial Corporates (PNFCs) in the fourth quarter.
According to the report, availability of credit increased for all businesses sizes Q4 2017, as lenders expect the same trend in the next quarter.
Small businesses are defined as those with an annual turnover of under N5 million, Medium-size corporates are those with an annual turnover of between N5 million and N100 million, while Large corporates are those with an annual turnover of more than N100 million.
Changes in spreads between bank rates and MPR on approved new loan applications to the small businesses and Other Financial Corporates (OFCs) narrowed in Q4 2017, while that of medium and large PNFCs widened. Spreads were expected to narrow for small businesses but widen for all other business sizes in Q1 2018.
The proportion of loan applications approved for all businesses sizes increased in the fourth quarter, and are expected to further increase in Q1 2018.
Lenders required stronger loan covenants from all sized businesses in the Q4 and next quarters. Fees/commissions on approved new loan applications rose for all firm sized businesses except for medium PNFCs in the fourth quarter, and were expected to rise for all firm size except for OFCs in the next quarter.