March 9, 2022/CSL Research
The Central Bank of Nigeria (CBN) has sustained efforts to push more credit to the economy. Based on the recently released money and credit statistics, lending to the private sector was up 0.7% m/m, reaching another high of N35.5tn in January 2022 from N35.2tn as of December 2021. Y/y, private sector credit was also up by 15.7% from N30.6tn in January 2021. Likewise, credit to the government improved, up 7.1% m/m and 16.0% y/y to N14.3tn from N13.3tn in December 2021 and N12.3tn in January 2021.
Elsewhere, in the last MPC statement released by the apex bank, the Non-Performing Loan (NPL) ratio of commercial banks was 4.94% as of December 2021, coming below the regulatory benchmark of 5.0% due to sound regulatory oversight by the CBN. Specifically, the apex bank gave forbearance, allowing banks to restructure loans to a few sectors severely affected by the coronavirus pandemic. The forbearance was extended for another year after the initial expiration in 2021. Fortunately, the increase in oil prices in the past year proved supportive, as many of the restructured loans to the oil and gas sector were reported to be meeting the new terms. In our view, the current rally in crude oil prices bodes well for the companies in the oil and gas upstream sector and gives the apex bank sufficient justification not to extend its forbearance measures beyond March 2022. Likewise, other sectors such as agriculture and manufacturing, which took a huge proportion of the credit, have reasonably recovered from the pandemic.
The m/m and y/y expansion in private sector credit reflect the CBN’s continued efforts to revive the ailing economy. The CBN has been relatively successful at supporting output recovery. Moreso, in 2021, the apex bank maintained the benchmark Monetary Policy Rate (MPR) at 11.5%, avoiding any further tightening that could stifle credit growth. That said, the current relatively low yields on investment securities will continue to force many banks to increase lending to the real sector of the economy. Overall, we expect an improvement in loan growth over 2021. We forecast average loan growth of 15% for Tier one banks in 2022. Banking sector credit to the private sector (Ntn).
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