Amid Macroeconomic Challenges, Banks’ Lending to Govt, Private Sector Tumble by 11% to N64.9trn

Kayode Tokede

Following macroeconomic challenges, banks’ lending to governments and the private sector dropped by 11 per cent or N8.06 trillion to N64.9 trillion in November 2023 from N72.96 trillion in October 2023, according to the Central Bank of Nigeria (CBN) latest Money and Credit statistics.

Analysis of the CBN data revealed that credit to government closed October 2023 at N9.39 trillion, dropping by 45 per cent to N5.16 trillion in November 2023, while credit to private sector moved from N63.57 trillion in October 2023, representing a decline of 6.03 per cent to N59.74 trillion in November 2023.

The CBN data also showed that credit to the private sector recorded its first decline in November amid double-digit inflation rate, weakened Naira against other currencies, hike in operating expenses, insecurity, among others.

In January 2023, the CBN revealed that credit to the private sector stood at N41.54 trillion, increased to N41.75 trillion in February and crossed the N43 trillion mark to N43.01 trillion in March 2023.

The statistics showed that credit to private sector increased to N43.66 trillion in April 2023, hits N44.8 trillion in May 2023 and closed June 2023 at N52.81 trillion.

Between July and August 2023, credit to the private sector stood at N56.46 trillion and N56.95 trillion, respectively. It, however, rise to N59.51 trillion in September 2023.

The lending to government reached a peak of N31.23trillion in June 2023.

Analysts have expressed that cost of production, coupled with scarcity of foreign exchange, played a significant role in banks credit to the private sector.

Speaking with THISDAY, CEO, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf attributed the decline to macroeconomy challenges.

“With the present challenges in the foreign exchange market, 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 explained that interest rate in the banking sector has also witnessed an increase amid 18.75 per cent Monetary Policy Rate (MPR).   

According Yusuf, “MPR has remained at 18.75 per cent but rate on 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 45 per cent decline in lending to the government, he expressed that President Bola Tinubu 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.