Banks credit to economy hits N22.61tn

According to the Central Bank of Nigeria (CBN), the total exposure of Deposit Money Banks to the Nigerian economy climbed up to N22.61 trillion in October.

Going by the economic report released by the CBN on Friday, the N22.61 trillion suggests an increase over the September 2019 figure by 0.6%.

Nevertheless, banks’ Loan to Deposit Ratio (LDR), which measures the size of loan/credit facilities granted by banks compared to the customers’ deposit they hold, shrank by 0.3% to 61.9% in the period under review.

On 3^rd July 2019, the apex bank had issued a directive, compelling banks to maintain a minimum LDR of 60% by 30^th September 2019. The LDR stood at 58.5% at the end of May 2019 and had been increased to 65% for Q4 2019.

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The CBN claimed the introduction of the minimum LDR had facilitated the inflow of credit into the economy while hinting that it might be further augmented to 70% in 2020.

The report states: “Commercial banks’ credit to the domestic economy rose by 0.6 per cent to N22.26tn at end-October 2019, compared with the level at the end of the preceding month. The development was attributed to the rise in its claims on the private sector.

“The loan-to-deposit ratio, at 61.9 per cent, was 0.3 percentage point below the level at the end of the preceding month and was lower than the maximum ratio of 80 per cent by 18.10 percentage points.”

The report further indicates that the total liquid assets of banks as of 31^st October 2019 was N14.27 trillion, making up 59.3% of their total current liabilities. It states that the liquidity ratio was 0.9 percentage point, lower than that of the month before.

“Total assets and liabilities of commercial banks amounted to N41.42tn at end-October 2019, showing 4.6 per cent increase, compared with the level at the end of the preceding month.

“Funds were sourced, mainly, from increase in unclassified liabilities, and the mobilisation of time, savings and foreign currency deposits,” the CBN said.

It affirmed the funds were used in procuring foreign assets and unclassified assets as well as to boost reserves.

Godwin Emefiele, the apex bank’s chief, observed that the nation’s banking system had improved, claiming that this development resulted from the CBN’s new policy measures especially its reforms on banks’ LDR. He claimed this had raised gross credit by N1.1 trillion between May and October 2019.

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