Nigerian banks have significantly increased their loans and support to the private sector, reaching approximately N375.78 trillion in the first five months of 2024. This marks a substantial 74.98% increase from N214.76 trillion recorded in the same period the previous year, demonstrating the banking sector’s growing role in supporting the economy.
Credit to the private sector from banks encompasses loans, trade credits, and other receivables provided within a specified period. This metric is a critical indicator of the banking sector’s balance sheet resilience and its contribution to the national economic agenda.
- May 2024: Credit rose to N74.31 trillion, a 65.9% increase from N44.79 trillion in May 2023.
- April 2024: Credit stood at N72.92 trillion.
- March 2024: Credit amounted to N71.21 trillion.
- February 2024: Recorded the highest contribution at N80.86 trillion.
- January 2024: The second highest contribution was N76.48 trillion.
The latest credit figures coincide with a recent report on capital importation into Nigeria, showing significant foreign investment facilitated by banks. Analysts attribute this to growing confidence in the Nigerian banking sector, with foreign investors becoming more active.
According to the National Bureau of Statistics’ report for Q4 2023:
- Total Capital Inflow: Increased by 2.62% to $1.09 billion from $1.06 billion in Q4 2022.
- Sector Breakdown:
- Production/Manufacturing: Highest inflow at $450.11 million (41.35%).
- Banking Sector: $283.30 million (26.03%).
- Financing: $135.59 million (12.46%).
Experts at Cordros Capital anticipate that the CBN’s enforcement of the loans-to-deposits macro-prudential ratio will continue to drive banks’ willingness to create risk assets. Research by the International Monetary Fund (IMF) underscores the importance of strong bank balance sheets in maintaining lending during financial crises.
The IMF study concluded that banks with robust balance sheets were better positioned to sustain credit supply during economic downturns. Higher and better-quality capital mitigated the negative effects of dependency on market funding and low structural liquidity.
CBN Governor, Dr. Olayemi Cardoso, emphasized that ongoing recapitalization efforts would bolster banks to support Nigeria’s $1 trillion economic target and ensure stable growth. He noted that additional capital would not only provide a buffer against potential economic challenges but also enhance the banks’ ability to compete globally and support massive economic growth.
