CBN: CPS to remain in double digits in short term –Experts

By Chinwendu Obienyi

Following a significant increase in Credit to the Private Sector (CPS), economic experts have projected that the growth of CPS will persist in double digits in the short term before moderating to single digits in the medium term

According to the Central Bank of Nigeria (CBN), CPS increased by 93.7 per cent year-on-year (y/y) to N80.86 trillion in February as against N41.75 trillion recorded in February 2023.

Speaking on the development, analysts at Cordros Research attributed the sustained CPS growth to the dual impact of CBN’s enforcement of the 65.0 per cent loan-to-deposit ratio and the depreciation of the local currency.

On a month-on-month basis, the CPS increased by 6.0 per cent in February as against (January’s figure of +22.0 per cent m/m to N76.29 trillion).

Similarly, the broad money supply grew by 77.6 per cent y/y to N93.97 trillion, mirroring the increases observed in narrow money supply (+44.5 per cent y/y) and quasi money (+99.3 per cent y/y).

Looking ahead, they revealed that they are anticipating that the impact of the naira depreciation on CPS will diminish, primarily due to the expectation of a stable naira in the short to medium term and the CBN’s imposition of limits on Bank’s Net Open Position in Foreign Assets.

Conversely, they also foresee that the re-enforcement of the CBN’s limit on the loans-to-deposits (LDR) macro-prudential ratio for deposit money banks (DMBs) will incentivize commercial banks to increase their willingness to create risk assets in the short term.

“On the other hand, we expect that the re-enforcement of CBN’s limit on the loans-to-deposits (LDR) macro-prudential ratio for deposit money banks (DMBs) will drive the willingness of commercial banks to create risk assets in the short term.

On the balance of factors, we expect the growth of Credit to Private Sector (CPS) to remain in double digits in the short term, before shrinking to single digits in the medium term”, they said.