Credit To Private Sector Adds N3.01trn In 5 Months, Highest In 60 Years – CBN

With the Central Bank of Nigeria (CBN) maintaining a minimum Loan-to-Deposit Ratio (LDR) of 65%, among other measures to stimulate lending, credit to the private sector increased by N3.01 trillion between January and May 2022, hitting an all-time high of more than 60 years.

According to CBN data, credit to the private sector reached N38.1 trillion in May 2022, an increase of 8.5% or N3.01 trillion from N35.18 trillion in January 2022. According to the most recent figures, credit to the private sector has increased 18.9% year on year, or N6.08 trillion, from the N32.12 trillion recorded by the CBN in May 2021.

According to the CBN, credit to the private sector was N35.99trillion in February and hits N36.47trillion in March 2022. It crossed the N37trillion mark in April to N37.68trillion.

The CBN previously stated that lending to the private sector will reach N35.73 trillion in 2021, up from N26.65 trillion in 2019.

Credit to the private sector increased by N3.75 trillion or 16.33% in 2019, when the LDR policy was implemented, to N26.69 trillion, up from N22.95 trillion in 2019.

Credit to the private sector increased by N3.5 trillion or 13.12% in 2020, ending December 2020 at N30.15 trillion, up from N26.65 trillion in January 2020.

However, credit to the private sector increased by N5.08 trillion or 16.57 percent in 2021, ending the year at N35.38 trillion, up from N30.65 trillion announced by the CBN in January 2021.

The CBN numbers showed that Money Supply (M2) grew by 21.83 per cent to N48.56 trillion in May 2022 when compared to N39.69 trillion reported in May 2021.

The huge surge in money supply reflects increasing demand for cash by members of the public caused by the continued rise in prices of goods and services, evidenced by the three consecutive months rise in the inflation rate at 17.71 per cent in May this year.

However, the surge in money supply is driven by increased borrowing by the federal government and lending to the private sector propelled by the various intervention funds of the CBN.

Further analysis also showed that major components of M2, namely Narrow Money (M1) and Quasi Money, recorded sharp increases in May 2022.

M1 comprises Currency Outside Banks (CoB), and Demand Deposits (Current Account deposits of bank customers). Quasi Money comprises Savings Deposits, Fixed Deposits and Foreign Currency Deposits of bank customers.

According to the CBN’s data, M1, rose by 26.77 per cent or N4.35 trillion to N20.61 trillion in May 2022 from N16.26 trillion reported ending May 2021.

Also contributing to the huge growth in money supply ending May 2022 is the sharp increase in credit to the government during the period. The CBN data showed that credit to the government rose sharply by 45.55 per cent or N5.72trillion to N18.27 trillion as of the end of May 2022 from N12.55 trillion in the corresponding period of 2021. Commenting, analysts believe the N38.2 trillion credit to the private sector as of May, is still within the range of credit growth in 2021.

“An average monthly growth rate of 1.66per cent since December 2021, is an indication of a moderate credit extension to the private sector of the economy, in consonance with low absorptive capacity of the economy itself, and as possibly programmed by CBN, given mirage of problems bedevilling the Nigerian economy.

“An economy with low productivity and total reliance on import must guide its credit expansion, in order not to put too much pressure on a faulty exchange rate management. Further credit expansion amid poor monetary and fiscal coordination, could spell doom for the economy. This is one of the reasons our economy is not doing well, ”said CEO, Wyoming Capital & Partners, Mr Tajudeen Olayinka.

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