- Banks extend N75.48trn credit to private sector in 12 months
The composite Performance Managers’ Index for August 2024 stood at 50.2 index points indicatingexpansion in economic activities for the first time in thirteen consecutive months of contraction.
The sectoral breakdown shows that the Services Sector recorded expansion for the third consecutive month, while the Agricultural Sector registered expansion for the first month.
The report released by the Central Bank of Nigeria on Wednesday showed that the Industry Sector, though contracted, registered a slower contraction when compared to the level recorded in the previous month.
Among the 36 subsectors reviewed across the Industry, Services and Agriculture Sectors, 17 subsectors reported growth with Primary Metal reporting the highest growth during the review month, while the remaining 19 subsectors registered a decline with Forestry reporting the highest decline.
Output, New Orders and Stock of Raw Materials at 50.8, 50.5 and 51.3 points, respectively indicated growth. Suppliers’ Delivery Time is Stationary at 50.0 points, while Employment at 48.7 points registered a decline in August 2024.
The Composite Output Index stood at 50.8 points in August 2024, indicating growth in production level for the second consecutive month.
Of the 36 sub sectors reviewed, 19 subsectors reported growth in production during the review month, with Primary Metal recording the highest expansion, while 14 subsectors registered a decline with Nonmetallic Mineral Products reporting the highest decline. The Fabricated Metal Products; Electricity, Gas, Steam and Air Conditioning Supply; and Utilities sub sectors remained stationary.
In August 2024, the composite Level of New Orders index at 50.5 points indicated expansion in the volume of incoming businesses/orders. Of the 36 sub sectors reviewed, 15 sub sectors reported growth in Levels of New Orders with Primary Metals recording the highest growth. Plastics & Rubber Products and Transportation Equipment subsectors were stationary, while the remaining 19 sub sectors reported lower Levels of New Orders in the review month.
The composite Employment index, at 48.7 index points in August 2024, indicated contraction in employment level for the eighth consecutive month.
This index when compared to the level in July 2024 remained unchanged, indicating no significant change in employment during the period.
Nineteen sub sectors reported contraction in Employment level, with Transportation Equipment and Forestry subsectors recording the highest decline in the review month. Six sub sectors remained unchanged, while the remaining 11 sub sectors reported increased Employment Levels with the Electrical Equipment subsector having the highest Employment index.
The overall Stock Level in August 2024 registered an expansion, with an index of 51.3 points. This marks the third consecutive instance of expansion in 2024.
Eighteen subsectors reported increased stock, with Primary Metal experiencing the highest growth. Eight sub sectors remained stationary, while 10 subsectors registered declines in Stock Levels. Notably, the Transportation Equipment subsector recorded the lowest Stock Level for the review month.
Banks extend N75.48trn credit to private sector – CBN
In the same vein, banks’ credits to the private sector rose by 34 per cent to N75.48trn in July, from N56.46trn in the prior year.
This is according to the latest data on credit to the private sector obtained from the Central Bank of Nigeria.
On a month-on-month basis, banks’ credit to the private sector rose by about N2.29trn between June and July.
CPS includes loans, trade credits and other account receivables and supports provided by banks to the private sector within a period.
The CPS is a global measure of the banking sector’s balance sheet resilience and contribution to the national economic agenda.
According to experts, increased private sector credit implies a major boost for the economy, as there is a link between credit to the private sector and economic growth.
Analysts at Cordros Capital projected that credit to the private sector may continue in the period ahead.
“We believe the reinforcement of the CBN’s limit on Deposit Money Bank’s loans-to-deposits macro-prudential ratio will continue to drive the willingness of commercial banks to create risky assets over the short to medium term,” Cordros Capital stated.
Analysts, however, noted that the apex bank’s intensified monetary policy tightening measures could impact the magnitude of growth going forward.
A study published by the CBN noted, “Credit is growth-enhancing, even when trade openness, monetary policy, investment climate and infrastructure are low.”
The study found that private-sector credit increased economic growth.
The balance sheet strength of banks also determines the flow of credits, with the continuing increase in lending amidst macroeconomic headwinds underpinning Nigerian banks’ resilience and stability.
In a study on ‘Balance Sheet Strength and Bank Lending During the Global Financial Crisis’, researchers at the International Monetary Fund examined the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said the credit outlook remained cautious, calling for an expansive distribution of credits across all tiers of companies and sectors.
According to Yusuf, there are major concerns in terms of the distribution of credits across sectors and companies with small businesses, which contribute more to job creation and economic inclusion, not likely to benefit much.
He noted that banks tend to be wary of credit risk concerns associated with lending to small businesses and certain sectors, adding that efforts should be made to drive inclusive and stable credit access to all sectors, including growth and employment elastic sectors such as agriculture, manufacturing, real estate, mining and construction.
Meanwhile, a report by the CBN showed that Nigerian banks had seen a significant increase in deposits during the first half of this year.
The report indicated that banks’ demand deposits rose from N26.7trn recorded at the end of December 2023 to N33trn by June 2024.
Banks sustained steady growth in deposits across the quarters.
Total demand deposits in the first quarter ended rose by 8.1 per cent to N28.9trn and went further up by 14.3 per cent to N33trn in Q2 2024.
Most banks saw a significant increase in deposits in recent periods, providing the headroom for most banks to create new loans and advances.
Financial analysts said banks were in a position to continue to create more loans, citing aggressive growth strategies by banks and enabling a regulatory environment.
