Total credit to economy rises 10.5% to N19.54 trln in Nov ~CBN
By Samuel Bankole
Total credit to the economy rose by 10.5 percent to N19.54 trillion by November 13, from N15.56 trillion in May 2020, according to a report by the Central Bank of Nigeria (CBN).
The increase in credit allocation by banks to the productive sector of the economy was spurred by the implementation of the CBN Loan-to-Deposit Ratio (LDR) Policy, the report stated.
Credit growth was largely recorded in Manufacturing, consumer credit, General Commerce, Information and Communication, Construction and Agriculture.
The largest recipient of the new credit remains the manufacturing sector, consumer credit, general commerce, ICT, construction and agriculture.
The report also shows that more bank customers are getting loans at lower interest rates.
For instance, as of October 2020, 86 percent of the total loan portfolio were granted at less than 20 percent interest rate compared with 76 percent in June 2019
A member of the regulatory bank monetary policy committee, Ahmed Aliyu said the “well-targeted credit delivery to productive economic sectors should be sustained to rapidly expand aggregate demand.”
He also said that the momentum of implementation of the Loan-to-Deposit Ratio Policy and other growth-enhancing policies should be geared up to assure a quick exit from recession.
However, despite the growth in credit allocations to the productive sector, members of CBN monetarists are worried by the wide spread between lending and deposit rates in the country.
They are concerned that the wide spread could discourage savings culture while the cost of borrowing remains high.
According to Mike Obadan, a member of the monetarist, the current lending rates are still high while there is unacceptable disparity between lending and deposit rates.
“The spread between the two rates is wide standing at 26.47 percentage points in November. Such a wide spread discourages savings and unnecessarily favours the Deposit Money Banks (DMBs).
“After some months of implementation, there is need for the Bank (CBN) to review two extant policies relating to savings/deposit interest rates and corporate savings/deposits,” Obadan stated in his report to the last MPC meeting.
He said the CBN policy which pegged savings deposit rate at 10 percent of MPR is promoting financial repression