Total loans to businesses hit N18.9 trillion in one year

Total gross credit for various transactions in Nigeria rose by N3.33 trillion from N15.56 trillion at end-May 2019 to N18.90 trillion at end-June 2020.

These credits were largely recorded in manufacturing, consumer credit, general commerce, and information and communication and agriculture, which are productive sectors of the economy.

According to a Central Bank of Nigeria (CBN) report, the rise in interest rate reflected the liquidity condition in the system, noting that the inflation rate of 12.26 per cent for March 2020, resulted in negative real rates for deposits, but positive real rates for the prime and maximum lending rates.

Besides, bank customers paid between 15.01 per cent and 30.70 per cent for borrowed funds, but interest paid on their term deposits dropped by 1.46 percentage points to 6.27 per cent, the CBN’s Economic Report for the first quarter (Q1) of 2020 showed.

The report indicated that the average prime and maximum lending rates rose by 0.02 percentage point and 0.47 percentage point, respectively, to 15.01 per cent and 30.70 per cent, in the review period, above their levels in the preceding quarter.

The average prime and maximum lending rates stood at 29.98 per cent and 14.99 per cent, respectively, in Q4 2019.

The rising lending rates, analysts said, led to upward pressure on market rates and cost of production for the manufacturing sector.

The CBN observed that despite the rise in lending rates, banks were paying less deposit interest to depositors. The average term deposit rate fell by 1.46 percentage points to 6.27 per cent, while spread between average term deposit and average maximum lending rates widened by 1.93 percentage points to 24.43 percentage points.

The spread gap indicated that customers are paying 24.43 per cent higher fee than they are getting from banks. However, the Monetary Policy Rate (MPR), which is the benchmark interest rate at which the CBN lends to the commercial banks, is currently at 12.5 per cent.

Continuing, the report showed that money market rates were generally stable and moved in tandem with the level of liquidity in the first quarter of 2020. Daily interbank call and Open Buy Back (OBB)-discountable securities traded in the Nigerian Inter-Bank financial transactions – rates ranged from five per cent to 7.24 per cent and 1.77 per cent to 21.02 per cent, respectively.

The average interbank and OBB rates were 10.68 per cent and 12.08 per cent, respectively. Other rates, such as the seven-day and thirty-day Nigerian Inter-bank Offered Rate (NIBOR) traded at 11.74 per cent and 9.81 per cent, respectively.

CBN Governor, Godwin Emefiele, said aggregate domestic credit (net) grew by 5.16 per cent in June, compared with 7.47 per cent in May, despite the rise in lending rates.

The average term deposit rate fell by 1.46 percentage points to 6.27 per cent, while spread between average term deposit and average maximum lending rates widened by 1.93 percentage points to 24.43 percentage points.

The spread gap indicated that customers are paying 24.43 per cent higher fee than they are getting from banks.  However, the Monetary Policy Rate (MPR), which is the benchmark interest rate at which the CBN lends to the commercial banks, is currently at 12.5 per cent.