- N20.3tr added in one year
Overview of Bank Credits Growth Banks’ credits to the private sector increased by N20.31 trillion to N73.12 trillion in the first half of 2024, deploying additional deposits to fund various economic sectors. Data from the Central Bank of Nigeria (CBN) showed that credit to the private sector (CPS) rose by 38.5% to N73.12 trillion by June 2024, compared to N52.81 trillion in the same period in 2023.
Components and Importance of CPS The CPS includes loans, trade credits, and other receivables provided by banks to the private sector. This measure reflects the banking sector’s balance sheet resilience and its contribution to the national economic agenda. Most banks saw significant deposit increases recently, allowing them to extend new loans and advances.
Deposit Growth Total deposits in the banking sector increased by 63%, from N70.5 trillion in 2022 to N115 trillion in 2023. This growth highlights the banking sector’s robust balance sheets and their response to the CBN’s push for increased lending to stimulate economic activities.
Banking Sector’s Economic Role The data underscore the banking sector’s role as a cornerstone of the country’s economic renewal agenda. However, a month-on-month breakdown showed a 1.6% decline from N74.31 trillion in May 2024 to N73.12 trillion in June 2024, attributed to the CBN’s monetary tightening to control inflation.
Month-on-Month Lending Trends Banks’ lending to the private sector rose from N71.21 trillion in March 2024 to N72.92 trillion in April, peaking at N74.31 trillion in May 2024. This represented month-on-month increases of 1.9% in April and 2.4% in May.
Bank Deposits Reports Operational reports showed significant deposit growths in 2023. For example, Access Holdings’ deposits rose from N6.10 trillion in 2022 to N9.4 trillion in 2023. Zenith Bank’s deposits grew from N5.86 trillion to N11.43 trillion. Other banks like FBN Holdings, United Bank for Africa (UBA), and Guaranty Trust Holding Company also recorded substantial increases.
Capital Importation A recent report indicated that banks attracted nearly two-thirds of capital importation into the country, reflecting confidence in Nigerian banks as foreign investors become more active in the economy.
Economic Impact of Increased Lending Experts agree that increased private sector credit boosts the economy, with studies linking it to GDP growth. Analysts at Cordros Capital expect the CBN’s loans-to-deposits ratio to continue driving commercial banks’ willingness to create risk assets.
Studies and Findings A CBN study concluded that credit enhances growth even in challenging economic conditions. Another IMF study highlighted that banks with strong balance sheets maintained lending during crises better than others. Strong balance sheets are crucial for credit recovery post-crisis, supporting regulatory proposals under the Basel III framework.
Expert Opinions Mr. Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management, attributed credit growth to increased economic activity but noted that inflation and devaluation could moderate this increase. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), called for a cautious credit outlook with broad distribution across companies and sectors.
Future Outlook CBN Governor Dr. Olayemi Cardoso emphasized that ongoing bank recapitalization would strengthen banks to support the $1 trillion national economic target and enhance their global competitiveness. Experts agree that strengthening banks’ financial positions is necessary due to changing banking sector dynamics.
