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Nigerian banks’ loans and support for the private sector surged to approximately N74.31 trillion by the end of May 2024, according to data from the Central Bank of Nigeria (CBN).
The latest CBN data indicated that credit to the private sector increased by 65.9% or N29.52 trillion, rising to N74.31 trillion in May 2024 from N44.79 trillion recorded in the same period of 2023. This growth underscores the banking sector’s continued support for the Nigerian economy.
Bank credit to the private sector encompasses loans, trade credits, and other account receivables, all of which are provided by banks within a specific period.
A closer look at the data showed that credit to the private sector (CPS) stood at N72.92 trillion in April, N71.21 trillion in March, with February recording the highest contribution at N80.86 trillion, followed by January at N76.48 trillion in 2024.
The recent CPS data aligns with a report on capital importation into Nigeria, highlighting that banks have been successful in attracting significant capital inflows. Analysts have noted this as a sign of growing confidence in Nigerian banks, with foreign investors increasingly participating in the nation’s economy.
According to the National Bureau of Statistics (NBS) capital importation report for Q4 2023, released earlier this month, Stanbic IBTC Bank, Citibank Nigeria, and Rand Merchant Bank were the top facilitators of $1.09 billion in capital importation into Nigeria during the fourth quarter of 2023.
The report indicated that Nigeria’s capital inflow rose by 2.62% to $1.09 billion from $1.06 billion recorded in the same period the previous year. The production/manufacturing sector attracted the highest inflow with $450.11 million, representing 41.35% of total capital imported in Q4 2023. This was followed by the banking sector with $283.30 million (26.03%), and financing with $135.59 million (12.46%).
Experts at Cordros Capital have noted that the CBN’s reinforcement of the loans-to-deposits macro-prudential ratio for Deposit Money Banks is expected to continue driving commercial banks’ willingness to create risk assets.
A study by the International Monetary Fund (IMF) titled ‘Balance Sheet Strength and Bank Lending During the Global Financial Crisis’ examined the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy. The study found that “banks with strong balance sheets were better able to maintain lending during the crisis.”
According to the study, banks that were more dependent on market funding and had lower structural liquidity reduced the supply of credit more than others. However, higher and better-quality capital mitigated this effect. The study suggests that strong bank balance sheets are crucial for the recovery of credit following crises, supporting regulatory proposals under the Basel III framework.
CBN Governor, Dr. Olayemi Cardoso, stated that the ongoing recapitalization efforts would further strengthen banks, driving Nigeria towards its $1 trillion economic target and supporting stable economic growth.
Dr. Cardoso emphasized that additional capital would not only provide a substantial buffer against potential economic challenges but also enhance Nigerian banks’ capacity to support significant economic growth and compete globally.
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