Banking

How economic uncertainties slow banks’ consumer credit

by Hope Moses-Ashike

March 7, 2018 | 12:56 am
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Consumer credit reduced by 3.4 per cent to N736.19 billion at the end of June 2017, compared with N762.07 billion at the end of December 2016, due to prevailing economic uncertainties which made banks more risk averse to consumer lending.

Consumer credit constituted 3.54 percent of the total credit to the core private sector, and was 0.09 percentage point lower than the proportion in the second half of 2016, according to the Central Bank of Nigeria (CBN).

The CBN’s Financial Stability Report  (FSR) review that  the banks’ credit to the various sectors trended downward during the review period. Credit to the private sector fell by 1.47 per cent to N15.907 trillion from N16.293 trillion at the end of December 2016.

The oil and gas sector accounted for the highest share of total credit at 29.29 per cent at the end of June 2017 similar to 30.02 per cent in the second half of 2016.

The contribution of manufacturing sub-sector to total credit rose to 13.97 at the end of June 2017 from 13.59 in the preceding period, construction increased to 3.98 from3.89 and power and energy sub-sectors total credit rose to 4.83 percent from 4.46 per cent in the preceding half year.

However, agriculture, forestry and fishery sub-sector, declined to 3.18 percent from 3.25 per cent in the preceding half year.

The banking system’s credit to the private sector fell by 0.02 per cent to N21. 98 trillion, at the end of June 2017 compared with the growth of 17.42 and 14.59 per cent recorded at the end of December 2016 and the corresponding period of 2016, respectively.

The development was due mainly to the 0.93 per cent decrease in claims on the core private sector which more than offset the impact of 19.28 per cent growth in claims on state and local governments.

In terms of contribution to the movement of total monetary assets, claims on the private sector contributed negative 0.02 percentage point compared with 16.28 percentage points at the end of December 2016.

Similarly, the contribution of credit to the core private sector to the movement in M2 fell from 14.26 percentage points at the end of December 2016 to negative 0.83 percentage point at the end of June 2017.

However, net aggregate credit to the domestic economy rose marginally by 1.02 per cent from N26.65 trillion at the end of December 2016 to N26.92 trillion at the end of June 2017. The development reflected increase in net claims on the Federal Government.

In terms of contribution to movement in M2, the net domestic credit of the banking system contributed 1.16 percentage points compared with 25.15 percentage points at the end of December 2016.

Hope Moses-Ashike


by Hope Moses-Ashike

March 7, 2018 | 12:56 am
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