The Central Bank of Nigeria’s (CBN) Credit Condition Survey for the third quarter (Q3) has revealed that the overall availability of credit to the corporate sector increased in the period under review.
The report, which was posted on the central bank’s website at the weekend, anticipated further increase in credit in Q4 2018.
The CBN had revealed at the last Monetary Policy Committee (MPC) that credit to the private sector grew marginally by 0.81 per cent in August 2018, from a contraction of 0.13 per cent in July 2018. Credit to the private sector had increased year-on-year to N22.261 trillion as of July 2018.
Continuing, the latest report stated that the increase recorded in Q3 was driven by changing sector-specific risks, favourable economic conditions, improved liquidity conditions, market share objectives and changing appetite for risk.
“Lenders reported that the prevailing commercial property prices negatively influenced credit availability of the commercial real estate sector in the current quarter.
“However, lenders expect the prevailing commercial property prices to positively influence secured lending to public non-financial corporations (PNFCs) in the current quarter,” it added.
Furthermore, the report showed that availability of credit increased for all business sizes in Q3 2018, just as lenders expected the same trend in the next quarter.
“Spreads between bank rates and monetary policy rate (MPR) on approved new loan applications for all business sizes narrowed in Q3 2018 but were expected to widen for all business sizes in Q4 2018.
“The proportion of loan applications approved for all business sizes increased in the current quarter and are expected to further increase in Q4 2018.
“Lenders required stronger loan covenants from all firm sized businesses in the current and next quarters. Fees/commissions on approved new loan applications fell for all firm sized businesses,” the report stated.
According to the survey, all firms benefitted from an increase in maximum credit lines on approved new loan applications in the period under review.
Similarly, it anticipated that all firms would also benefit from an increase in maximum credit lines on approved new loan applications in Q4 2018.
“More collateral requirements were demanded from all firm sizes on approved new loan application in Q3 2018. “Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.
“Demand for corporate lending from all business sizes increased in the current quarter and was expected to increase for all business sizes in the next quarter.” According to the report, demand for lending from medium PNFCs in Q3 2018 was higher in comparison with other loan types.
The most significant factors that influenced demand for lending in the review quarter were the increase in inventory finance and capital investment, and they were expected to remain the main drivers in the next quarter, the report stated.
In addition, it showed that corporate loan performance as measured by the default rates improved for all sized business in the review quarter, except for small businesses.
“Lenders also expect lower default rates on lending to all sized businesses in the next quarter, except for large PNFCs.
“The average credit quality on newly arranged PNFCs borrowing facilities improved for both quarters.
“Loan tenors on new corporate loans improved in Q3 2018 and were expected to improve further in the next quarter,” it added.
The report noted that in the current quarter relative to the previous quarter, lenders reported an increase in the availability of secured credit to households.
They noted that market share objectives and improving economic outlook were major factors behind the increase. Availability of secured credit was expected to increase in the next quarter, with market share objectives and higher appetite for risk as the likely contributory factors.
Also, lenders maintained the same credit scoring criteria in Q3 2018, and the proportion of loan applications approved in the quarter decreased.
“Lenders expect to tighten the credit scoring criteria in the next quarter, yet still expect an increase in the proportion of approved households’ loan applications in Q4 2018.
“The average credit quality on new secured lending improved in Q3 2018 and was expected to also improve in Q4 2018.
“Lenders reported that the overall spreads on secured lending rates to households relative to MPR narrowed in Q3 2018 but was expected to remain unchanged in the next quarter.
“Households demand for lending for house purchase decreased in Q3 2018 but was expected to increase in the next quarter,” it added.