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The Central bank of Nigeria (CBN) has said that its 65% loan to deposit policy pushed credit into the real sector of the economy by N6.63 trillion between 2019 and June 2021, exactly two years after the implementation of its directive.
The apex bank said this in a communique issue ahead of its last in the year monetary policy committee meeting scheduled for November 2021.
According to the statement, the policy authority noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio in 2019. CBN said industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021.
The apex bank also hinted that the credit growth was largely recorded in the manufacturing, oil and gas and agriculture sectors.
The Committee, thus, urged the fiscal authority to build on earlier efforts to articulate a clear strategy to attract private sector investment while resuscitating critical infrastructure to improve the ease of doing business in the country.
Detail shows that committee members observed that broad money supply (M3) rose to 5.83 per cent in August 2021, compared with 2.91 per cent in July 2021.
This was largely driven by the growth of Net Foreign Assets and Net Domestic Assets by 12.35 and 4.30 per cent in August 2021, compared with 1.84 and 3.17 per cent in July 2021, respectively, the CBN added.
It said the growth in net foreign assets was largely driven by an increase in 6 foreign asset holdings of commercial and merchant banks.
Also, it said the increase in net domestic assets reflects the boost to aggregate credit net, which increased to 8.14 per cent in August 2021, from 5.71 per cent in July 2021.
In the money market, the monthly weighted average Inter-Bank Call and Open Buyback (OBB) rates increased to 13.45 and 12.97 per cent in August 2021 from 10.72 and 11.60 per cent in July 2021, respectively.
This increase reflected the tight liquidity conditions in the banking system during the review period as the Bank curtailed excess system liquidity, according to the report.
In the banking sector, the CBN monetary policy committee noted that the capital adequacy ratio (CAR) and the liquidity ratio (LR) both remained above the prudential limits at 15.2 and 41.7 per cent, respectively at end-July 2021.
The Committee, also, welcomed the improvement in the Non-Performing Loans (NPLs) ratio at 5.4 per cent in July 2021, compared with 5.7 per cent in June 2021.
Thus, urged the Bank to sustain current efforts to bring NPLs below the 5.0 per cent prudential benchmark. #Loans to Deposit Policy Drives Credit Growth by N6.63Trn –CBN
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