Home Banking CBN announces increase in secured credits in 2019 Q4

CBN announces increase in secured credits in 2019 Q4

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By IKENNA EMEWU

Central Bank of Nigeria as announced a positive outllok for secured credits in the Fourth Quarter of 2019.

This was made known in a publication of the bank on its website Monday.  

It noted that: “The availability of secured credit to households increased in Q4 2019 and was expected to increase in the next quarter. Improving liquidity positions was the major factor for the increase in secured credit.”

Also in the executive summary of the report, it noted that “Lenders reported that the availability of unsecured credit to households increased in Q4 2019, but it is expected to fall in Q1 2020. Most lenders adduced market share objectives for this increase.”

The overall availability of credit to the corporate sector increased in Q4 2019 and was expected to increase in the next quarter. Improved market share objectives was the major factor contributing to the increase.

Demand: Demand for secured lending for house purchase increased in Q4 2019 and lenders expect demand for secured lending to increase in the next quarter. The proportion of loan applications approved increased even though lenders maintained the credit scoring criteria. 

Demand for total unsecured lending from households increased in the current quarter, and is expected to increase in the next quarter. In spite of lenders’ resolve to retain the credit scoring criterion, the proportion of approved unsecured loan applications increased in the current quarter and is expected to further increase in the next quarter.

Lenders reported increased demand for corporate credit from all firm sizes in Q4 2019. They also expect increased demand from all firm sizes in the next quarter. 

Defaults: Secured loan performance, as measured by default rates, improved in the review quarter, and lenders still expect lower default rates in the next quarter.

Total unsecured loan performance to households, as measured by default rates, improved in Q4 2019 and is expected to further improve in the next quarter. 

Corporate loan performance improved across all sizes of firm in the current quarter. Lenders expect lower default rates for all firm sizes in the next quarter. 

Loan pricing: Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR narrowed in Q4 2019 but was expected to remain unchanged in the next quarter.

The overall spreads on unsecured lending widened in Q4 2019 and were expected to widen in the next quarter. 

Changes in spreads between bank lending rates and MPR on approved new loan applications narrowed for all firm sizes in the current quarter and were expected to narrow for all business sizes in Q1 2020.

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