The Central Bank of Nigeria reported that Nigerian banks’ loans and support for the private sector totaled approximately N375.78 trillion in the first five months of 2024.
This is almost 74.98 percent greater than the N214.76 trillion reported in the same time last year, suggesting that the banking sector has continued to give increasing assistance to the economy, according to The Punch.
Bank credit to the private sector includes loans, trade credits, and other account receivables and supports supplied by banks for a certain period of time.
CBN data showed that credit to the private sector increased by 65.9 percent, or N29.52 trillion, to N74.31 trillion in May 2024, compared to N44.79 trillion in the same month in 2023.
A more detailed breakdown revealed that in April, CPS was at N72.92 trillion, up from N71.21 trillion in March. The greatest donation was made in February at N80.86tn, followed by N76.48tn the previous month.
The latest CPS data followed a recent study on capital imports into the country.
The analysis revealed that banks drew significant capital into the country. Analysts claimed this was a sign of confidence in Nigerian banks as foreign investors become more involved in the country’s economy.
According to the National Bureau of Statistics capital importation report for Q4 2023, released earlier this month, Stanbic IBTC Bank, Citibank Nigeria, and Rand Merchant Bank topped the pack in facilitating $1.09 billion in capital importation into Nigeria in the fourth quarter of 2023.
According to the Q4 2023 report, Nigeria’s capital inflow increased by 2.62 percent to $1.09 billion, up from $1,060.73 million in the same time last year.
The production/manufacturing sector received the most inflow, $450.11 million, accounting for 41.35 per cent of total capital imported in Q4 2023. The banking sector received $283.30 million (26.03 per cent), and financing received $135.59 million (12.46 per cent).
Cordros Capital analysts predicted that the CBN’s re-enforcement of the loans-to-deposits macroprudential ratio for Deposit Money Banks will continue to increase commercial banks’ propensity to create risk assets.
In a study on ‘Balance Sheet Strength and Bank Lending During the Global Financial Crisis’, researchers at the International Monetary Fund examined the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy.
The analysis determined that “banks with strong balance sheets were better able to maintain lending during the crisis” .
According to the findings, banks that were more reliant on market funding and had weaker structural liquidity restricted credit supply more than other banks.
“However, higher and better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework,” the IMF report stated.
The governor of Central Bank, Dr. Olayemi Cardoso had stated that the continuing recapitalisation would strengthen banks further in order to push the $1 trillion economic aim and maintain stable growth.
