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By Merit Ibe
Centre for the Promotion of Private Enterprise (CPPE) has attributed the decline in Nigeria’s banks’ credit to the private sector and the government to macro economic challenges bedevilling the economy.
The loan granted by commercial banks to the private sector declined by 11.93 per cent in March 2024, following the liquidity tightening of the Central Bank of Nigeria (CBN).
Data from the CBN showed that credit to the private sector dropped to N71.21 trillion at the end of March 2024 compared to the level of N80.86 trillion in February 2024.
On a quarter-on-quarter basis, banks’ private sector credit also decreased by 6.66 per cent from N76.29 trillion in January 2024.
Reacting, Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, who attributed the decline to macro economic challenges, said that with the present hiccups in the foreign exchange market, the cost of production and high energy cost, investors will not want to take credit from banks.
“Banks can only finance projects that are doing well. If any project is having challenges, it will affect the demand for credit. The decline in credit to the private sector is because of the challenges in the economy. The present challenges are affecting a lot of business and you do not expect them to take money from the banks,” he said.
He explained that interest rates in the banking sector have also witnessed an increase amid the 18.75 per cent Monetary Policy Rate (MPR).
According to Yusuf, “MPR has remained at 24.75 per cent but the rate of lending has increased significantly in the banking sector. For SMEs today, the interest rate is over 25 per cent. Some banks’ interest rate is over 30 per cent. If the interest rate is high, people will be reluctant to borrow money from banks.”
On the decline in lending to the government, he said President Bola Tinubu’s administration is focusing on borrowing less from the banks.
“Because of the inflationary effect of borrowing from the banks, there is a deliberate policy by this present administration to reduce government exposure to bank’s credit,” he added.
