The Central Bank of Nigeria (CBN) reported that availability of secured credit to households increased from the very worrisome -36% in the first quarter of this year to -7.4% in second quarter (Q2, 2020).
The apex bank disclosed this in its latest Nigeria’s Credit Conditions Survey Report for the second quarter.
Similarly, it reported a similar upswing in the credit scoring criteria which increased by 3.6% despite being at a fixed level in the last four quarters and are projected to rise to 8.7% by the end of this quarter (Q3,2020).
A further analysis of the report showed that during the quarter under review (Q2), the maximum loan to income ratios stood at 2%, representing a decline of 0.7% points compared to 2.7% recorded in Q1 and is predicted that the ratios would remain unchanged (0%) this quarter.
According to the report, Borrowers who wished to lend with high loan to value ratios grew by 10.6% as against -7.6% recorded in the previous quarter.
The apex bank attributed the increase in supply of the secured credit to the changing appetite for risk, identifying other likely contributory factors to increased market share objectives and tighter wholesale funding conditions outlook.
The report stated, inter alia, “Lenders expect to further tighten the credit scoring criteria but preempt the proportion of approved households’ loan applications in Q3 2020 to increase.
“Maximum Loan to Value (LTV) ratios decreased in Q2 2020 and is expected to remain unchanged in Q3 2020. Lenders were not willing to lend at low LTV ratios (75% or less) in both Q2 and Q3 2020 but were willing to lend at high LTV (more than 75%) in Q2 and Q3 2020.
“The average credit quality on new secured lending improved in Q2 2020 and is expected to improve further in Q3 2020”, CBN added
However, the apex bank reported further indicated that unsecured loan (credit) provided to households dropped by 8.7% during the quarter under review.
Even then, it noted that this still represented an improvement compared to -19.9% recorded in Q1 and projected that the decline would reduce to -5.3% this quarter (Q3,2020).
However, the proportion of loan applications approved in the Q2 2020 decreased, as lenders tightened their credit scoring criteria.
The CBN further projected: “Lenders expect to loosen the credit scoring criteria in Q3 2020 and anticipate that the proportion of approved loan applications will increase.
“The proportion of approved credit card loans increased in Q2 2020, though the credit scoring criteria for granting credit card loans was tightened, the proportion of approved overdraft/personal loan applications decreased, as lenders tightened the credit scoring criteria.”
On credit extended to corporate sector, the apex bank reported that availability of credit to the corporate sector grew in the quarter (Q2) and that the upward swing in lending to corporate would rise further in the current quarter (Q3) due to “changing sector-specific risk.”
