Secured credit availability to households increased in Q1 2018 – CBN survey

The availability of secured credit to households increased in Q1 2018 and was expected to increase in the next quarter, according to the Central Bank of Nigeria credit survey for the first three months of the year.

The CBN said the favorable economic outlook was the major factor for the increase in the secured credit.

It also said lenders reported that the availability of unsecured credit to households equally increased in the review period, and the trend is also expected in Q2 2018.

“Most lenders adduced favorable economic outlook to this increase,” it said adding that the overall availability of credit to the corporate sector increased as well and was expected to continue into the next quarter.

On the demand side secured lending applications for house purchase decreased in Q1 2018. However, more lenders expect demand for secured lending to increase in the next quarter.

The report indicated that proportion of loan applications approved increased despite lenders’ tightening of credit scoring criteria.

“Demand for total unsecured lending from households increased in the current quarter, but was expected to decrease in the next quarter. Due to lenders stance on tightening the credit scoring criteria, the proportion of approved unsecured loan applications decreased in the current quarter, but was expected to increase in the next quarter,” the financial regulator noted.

It also said lenders reported increased demand for corporate credit across all firm sizes in Q1 2018. This is also expected across all firm sizes in the next quarter.

However secured and unsecured loan performance, as measured by default rates, worsened in the review quarter, but the lenders expect lower default rates in the next quarter.

Corporate loan performance improved across all sizes of firms in the current quarter, except for small businesses. Lenders generally expect the lower default in the current quarter.

Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR narrowed in Q1 2018, and was expected to remain narrow in the next quarter.

The spreads on overall unsecured lending narrowed in Q1 2018 and were expected to remain same in the next quarter. Changes in spreads between bank rates and MPR on approved new loan applications to all firm sizes widened in Q1 2018.

However, this is expected to widen for all firm sizes in the next quarter, except for small businesses This survey, according to the CBN serves as an input into the monetary policy document, which presents the CBN’s assessment of the latest trends in lending to the Nigerian economy.

This report presents the results of the Q1 2018, survey conducted from February 19 to 23,2017. The results are based on lenders’ own responses to the survey and do not necessarily reflect the CBN’s views on credit conditions.

It said to calculate aggregate results, each lender is assigned a score based on their response. Lenders who report that credit conditions have changed ”a lot” are assigned twice the score of those who report that conditions have changed “a little”.

These scores are then weighted by lenders’ market shares.

The results are analyzed by calculating net percentage balances — the difference between the weighted balance of lenders reporting that demand was higher versus lower or terms and conditions were tighter versus loosened.

The net percentage balances are scaled to lie between ±100. The Q1 2018 overall credit condition survey for households, small businesses and corporate entities indicated an increase in availability of secured credit to households and corporates, but a decrease in the availability of unsecured credit.

Spreads on overall secured and corporate lending to household narrowed in Q1 2018. Lenders reported that demand for total unsecured lending from households decreased in the current quarter, but was expected to increase in the next quarter. Demand for corporate lending increased across all firm sizes in the review quarter.