Gross credit in the banking sector reaches N24.57 billion

Gross credit in the banking sector increased from 20.48 trillion naira in December 2020 to 24.57 trillion naira in December 2021. This translates into an increase of over 4 trillion naira during the reporting period.

This increase was attributed to the increase in the funding base of the industry and the Central Bank of Nigeria (CBN) directive on loan to deposit ratio.

This was in the personal statements of committee members, particularly Aliyu Ahmed, who explained that the improvement in non-performing loans (NPLs) was mainly attributed to the CBN’s good regulatory oversight during the year.

For the first time in about a decade, commercial bank NPL levels in Nigeria fell below the regulatory benchmark of 5% to 4.94% at the end of December 2021.

Indeed, more and more members of the CBN’s Monetary Policy Committee (MPC) are considering a further tightening of monetary policy following a rise in inflation in the country.

CBN assures that the banking sector is in good health

In their assessment of the Nigerian banking sector, committee members noted that the sector remained resilient, with average non-outstanding loans exceeding regulatory requirements.

According to CBN Deputy Governor Aishah Ahmad, non-performing loans have fallen to their lowest level in more than a decade despite increased lending by banks.

She noted that total credit increased by 4.09 trillion naira between the end of December 2020 and December 2021, with significant credit growth to the manufacturing, general trade and oil and gas sectors.

“This impressive increase was achieved amid a continued decline in the non-performing loan ratio from 5.10% in November 2021 to 4.94% in December 2021, six basis points below the regulatory benchmark, for the first times in over a decade,” she said. .

This was also highlighted by another MPC member, Akinniju Festus, who noted that NPLs had fallen below the 5% prudential requirement, for the first time, after a long period.

He also noted that the capital adequacy ratio, despite its slight decrease from 15.1% in December 2020 to 14.53% in December 2021, is still above the prudential requirement of 10%.

For him, “the liquidity ratio at 41.33% was also higher than the prudential requirement of 30%. Returns on assets and returns on equity fell in December 2021 compared to December 2020. Operating costs to revenue fell from 68.2% in December 2020 to 73.1% in December 2021.”

Akinniju noted that the month-to-month interest rate differential widened to 25.3% in December 2021. While prime rates fell to 11.68%, lending rates maximum increased to 27.58%. Average savings rates fell to 1.25%. The administrative measures put in place by the CBN have limited excess liquidity in the system.

Tight liquidity conditions prevailed in the banking system, with the average net liquidity balance standing at N182.71 billion at end-December 2021, below the benchmark of N313.8 billion – 450.00 billion of naira.

Meanwhile, CBN Deputy Governor Adamu Lamtek said the option of monetary policy tightening still remains on the table, although the decision is becoming increasingly difficult to make. That’s when inflation continues to rise as the country heads into an election year in 2023.

“In addition, the US Fed has already provided forward guidance on at least three rate hikes in 2022, a move that will affect the currency exposures of the federal government and private sector institutions, particularly commercial banks. It may also lead to more exits of REITs from the local equity market.

“In a context of pressure on both production and prices, I must admit that maneuvering monetary policy would be difficult, to say the least.

“Under these circumstances, additional fiscal measures are needed to ease the adjustment burden on monetary policy. Clearly, political support has been very key to macroeconomic recovery in 2021. More is needed on the fiscal side in 2022, especially in sectors like agriculture, SMEs and solid minerals. In addition, physical infrastructure and security are expected to maintain their priority position on the budget plate over the course of the year.

“I believe that the option of tightening policy using the policy rate remains on the table as long as inflationary pressures persist. I hope, however, that the policy space to support growth will not shrink further by the end of the year. next MPC meeting in March 2022,” Lamtek said.