CBN to constrict lending conditions for corporate loans in Q2 2019

The Central Bank of Nigeria (CBN) on Wednesday said it would tighten lending conditions for granting corporate loans in the second quarter of 2019.

In its report titled: ‘Credit Condition Survey” for first quarter of 2019 (Q1’19) released yesterday, the apex bank revealed that banks intended to demand stronger loan covenants and more collateral for corporate loans.

It stated that stronger loan covenants would be required for all firm sized businesses except for small business, which they plan to leave unchanged, in the next quarter.

The report added “More collateral requirements were demanded from all firm sizes on approved new loan application in Q1’19.

Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.”

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CBN, in the report, expressed optimism that the default rates of Non Performing Loans (NPLs) would improve in the second quarter.

“Lenders experienced lower default rates on credit card and on overdrafts/personal lending to households in the current quarter.

“Secured loan performance, as measured by default rates, improved in Q1’19 and is expected to improve in Q2’19.

“Corporate loan performance as measured by the default rates improved for small businesses and large Private Non-Financial Corporations (PNFCs)

Lenders still expect lower default rates on lending to all sized businesses in the next quarter,” the report stated.

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