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CBN Reports Improved Credit Supply, Applications In Q4, 2018

The Central Bank of Nigeria on Tuesday reported improved supply and demand for secured and unsecured credit to bank customers in the fourth quarter of this year.

The apex bank in its ‘Credit Conditions Survey Report’ produced by the Statistics Department indicated that in terms of credit supply, the availability of secured credit to households increased in Q4 2018 and it is expected to increase in the next quarter.

The bank attributed the development to improving economic outlook was the major factor.

The report also showed that lenders reported that the availability of unsecured credit to households also increased during the quarter, a trend which is expected to increase in Q1 2019.

According to the CBN, most lenders adduced market share objectives for this increase.

Similarly, the bank reported that the overall availability of credit to the corporate sector increased in Q4 2018 and that it is expected to increase in the next quarter in view of the current favourable economic conditions.

On the demand side, the report reflected that demand for secured lending for households purchase decreased in Q4 2018, but that more lenders expect demand for secured lending to increase in the next quarter.

In addition, the bank noted that the proportion of loan applications approved increased even though lenders maintained the same credit scoring criteria just as demand for total unsecured lending from households increased in the current quarter, adding that this is expected to increase in the next quarter.

The apex bank clarified further: “Despite lenders’ resolve to leave the credit scoring criteria unchanged, the proportion of approved unsecured loan applications increased in the current quarter with lenders’ expectation that it would increase in the next quarter.

“ Lenders reported increased demand for corporate credit from all firm sizes except for OFCs in Q4 2018, adding however that they expect increased demand from all firm sizes in the next quarter”, CBN added.

As regards loan defaults generally, the bank reported that secured loan performance, as measured by default rates, worsened in the review quarter but that lenders expected lower default rates in the next quarter.

This is even as it stated that total unsecured loan performance to households, as measured by default rates, deteriorated in Q4 2018 but is expected to improve in the next quarter.

With corporate loan performance improving across all sizes of firm in the current quarter under review, banks generally expect lower default rates for all firm sizes in the next quarter.

On loan pricing trend, the apex bank reported that lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR remained unchanged in Q4 2018, and is expected to remain unchanged in the next quarter.

The overall spreads on unsecured lending widened in Q4 2018 but are expected to remain unchanged in the next quarter.

The report indicated that changes in spreads between bank rates and MPR on approved new loan applications widened for all business sizes except for loans to OFCs in Q4 2018, but that it is expected to widen for all firm sizes in the next quarter.

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