By Tayo Alabi
The aggregate credit in the banking sector rose by N2.35 trillion since the inception of the Loan to Deposit Ratio (LDR) policy.
According to Daily Independent reports, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) disclosed this in a communiqué released at the end of their meeting in Abuja last Wednesday.
The growth, according to the committee, was a reflection of the potency of the policy and thus, urged the management of the CBN to sustain the current momentum of improved flow of credit to the private sector in Nigeria.
It emphasised the need for coordination with the fiscal authorities, to strengthen access to credit to some critical sectors of the economy, including the weak and vulnerable population, particularly those in the informal sector through the setting up of a special fund, as well as support the enforcement of credit recovery.
Accordingly, sectoral distribution of credit between end-May 2019 and end-February 2020 was as follows: manufacturing (N533.06 billion); general retail and consumer loans (N 380.71 billion); general commerce (N 229.87 billion); agriculture, forestry and fishing (N 163.04 billion); information and communications (N 163.69 billion); finance and insurance (N 131.20 billion); construction (N 112.25 billion); and transportation and storage (N 45.42 billion), amongst others.
The MPC also noted the continued resilience of the banking system, evidenced by the further moderation in the ratio of Non-Performing Loans (NPLs) from 6.59 per cent in January to 6.54 per cent in February 2020.
Although the ratio remained above the prudential benchmark of 5.0 per cent, the committee expressed confidence in the bank’s regulatory regime and commitment to maintaining stability in the banking system.
“The overall medium-term outlook for the global economy remains uncertain with increased deterioration in financial market conditions and weak global output growth.
“The major headwinds to the current projection for global growth includes: disruption to the global supply chain arising from the COVID-19 pandemic; oil price downturn as a result of subdued global demand, vulnerabilities in major financial markets; rising corporate debt in the advanced economies and public debt in some emerging market and developing economies; as well as broad uncertainties leading to adverse shocks to foreign investment flows”, the committee stated.
On the domestic front, available data on key macroeconomic variables indicate the likelihood of subdued output growth for the Nigerian economy in 2020. Based on the current downturn in oil prices, staff projections indicate that output in the 2020 would be less than earlier envisaged.
The major downside risks to this outlook, however, include: the continued spread of COVID-19; further decline in crude oil prices and the reduction in accretion to external reserves; reduced government revenue leading to weak aggregate demand; declining non-oil receipts; as well as infrastructural and security challenges.
The committee believes that these headwinds will, however, be partly mitigated by: the timely and effective response of the monetary and fiscal authorities in containing the spread of the COVID-19 viral infection, the recalibration and adjustment of the 2020 Federal Budget to the revised thresholds while pegging expenditure to critical sectors of the economy, adoption of a new fiscal regime to encourage the build-up of fiscal buffers; sustained CBN interventions in selected sectors; enhanced flow of credit to the real sector and deliberate policies to diversify the Nigerian economy.
The committee, however, noted the dismal performance in the equities market as the All-Share Index (ASI) decreased by 17.30 per cent and Market Capitalisation (MC) by 10.73 per cent between end-December 2019 and March 20, 2020.
The decline was largely attributed to profit taking and divestment by foreign portfolio investors, the delisting of shares of three quoted companies and capital outflow associated with the COVID-19 and subdued global economic activity.
