Nigeria’s Private Sector Borrowing Rises to N33.8 Trillion – Report

The private sector is not the only sector borrowing. Credit to government has also increased to N13 trillion, the highest since the central bank started collating data in 1960. Nigeria is now in one of its highest-ever credit growth phases amassing a total net domestic credit of N46.8 trillion or 28.5% of GDP.

This medium can recall that the CBN’s Monetary Policy Committee (MPC) in its last meeting noted the effect of the growth in credit on stimulating the economy, encouraging banks to continue to channel credit to the real sector.

The MPC said: “The Committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.

“Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

it was learnt that manufacturing and oil and gas sectors dominate most of the lending in Nigeria with 15.7% and 25.4% respectively as a percentage of the total loans. Commercial and Merchant banks currently dominate the lending space in Nigeria with over 65% of the total loans to the private sector (based on 2020 data).

Also, the Microfinance banks have also recorded an increase in their lending over the years going from N305 billion as of December 2019 to N552 billion as of December 2020.

Irrespective the increase in borrowing, lending rates remain high, considering the maximum lending rate is about 27% according to CBN data for September 2021.

Recall that Microfinance banks also charge their customers in excess of 4% monthly on average for short term loans, a market that has seen a rise over the years.

Commenting on the risk of higher credit exposure, the apex bank has also advised commercial banks to adopt risk mitigation measures as they take on more risk assets.

It said: “While the Committee was cognizant of the credit risks associated with lending in the current economic climate, it urged Nigerian banks to extend more credit to businesses and consumers to facilitate a seamless recovery of output growth, reduce unemployment and stabilize prices.”