Nigeria banking credit spikes N774.3bn in 30 days on moderately rising minimum LDR

By Charles Abuede

• Total payouts as at January 2021 to mitigate the impact of COVID-19 amounted to N2trn

Moderately rising minimum loan-to-deposit ratio (LDR) set for Nigerian banks by the Central Bank of Nigeria (CBN) since the third quarter of 2019, along with various measures introduced by it to cushion the effect of the global health pandemic on MSMEs, households and various sectors in Nigeria, caused a surge of N774.28 billion in total banking sector gross credit to N25.02 trillion inDecember 2020,up from N24.25 trillion in November.

Godwin Emefiele, governor of the CBN, disclosed this as part of background data the guided the decision of the bank’s monetary policy committee (MPC) at its first meeting for 2021 in Abuja. He also noted that there was a significant expansion in the net domestic assets (NDA) from -0.45 per cent to 4.96 per cent between November and December.

Highlighting various interventions by the bank to allocate credit to the private sector, he noted that under the Anchor Borrowers Programme (ABP), N554.63 billion had been disbursed to 2,849,490 beneficiaries since the commencement of the programme, of which N61.02 billion was allocated to 359,370 dry season farmers.

The CBN has also committed a substantial amount of money towards synchronizing the efforts of the monetary and fiscal authorities to mitigate the impact of the COVID-19 pandemic, the committee noted in its communique, resulting in total payouts of N2 trillion as at January 2021.

The COVID-19 Targeted Credit Facility (TCF) meant for household and small businesses saw the disbursement of N192.64 billion to 426,016 beneficiaries. Similarly, the sum of N106.96 billion to 27,956 beneficiaries was paid out under the Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS), while the Health Care Support Intervention Facility got N72.96 billion to 73 projects that comprise 26 pharmaceutical projects and 47 hospitals and health care services project in the country.

Nigeria’s central bank said it also disbursed the sum of N3.12 billion to 320 beneficiaries through the Creative Industry Financing Initiative and N268 million to 395 beneficiaries via the Nigerian Youth Investment Fund, respectively. These expenses were in a bid to support the provision of employment opportunities for Nigerian youth and also provide financial support.

Meanwhile, the CBN has so far, provided N18.58 billion for the procurement of 347,853 electricity reading meters to power distribution companies (DisCos) in support of the National Mass Metering Programme, and also to enhance power supply.

Additionally, GovernorEmefiele, reading from the communique, stated that during the period under review, the aggregate domestic credit, also moved further up by 13.40 per cent in December 2020, compared with 9.48 per cent in the previous month, noting that the rise was largely attributed to the bank’s policy on Loan-to-Deposit Ratio (LDR), complemented by its interventions in various sectors of the economy.

Also speaking on the monetary performance, the CBN noted an additional growth in broad money supply (M3) to 10.97 per cent in December 2020 from 5.02 per cent in November 2020, driven largely by the growth in net foreign assets.

Why does this matter

Regardless of the underlying uncertainties in the global oil market, as well as the current surge in the second wave of the coronavirus pandemic, that could cause a slowdown or decline in economic output, coordinated and sustained interventions by the Nigerian fiscal and monetary authorities, which are inclusive of a broad-based stimulus and liquidity injections in the economy, could bring about an improvement in output growth as well as the continuous rise in the total credit disbursed to the private sector.