Citing the tight credit environment, FBNQuest Research has predicted that deposit money banks (DMBs) in the country are likely to maintain tight risk management frameworks in the months ahead.
The firm, which stated this in report released yesterday, also said that as a result of the tight risk management frameworks, modest credit extension to the economy by DMBs would continue to be modest.
It noted that the latest monthly economic report recently released by the Central Bank of Nigeria (CBN) showed that DMBs’ total credit extension to the economy increased by a modest 0.7 per cent m/m to N38.6 billion in August last year, which “compares unfavourably with a 2.1 percent m/m growth recorded in the previous month,” and also meant that on a year- to-date basis, credit lending to the economy grew by 30.9 per cent.
The firm said that it had anticipated the moderate expansion in credit extension as banks adopted stricter credit standards in response to the heightened interest rate environment, noting that DMBs’ credit growth m/m across all sectors was generally relatively flat, except for a m/m decline in the agriculture sector.
Further analysing the CBN’s report, FBNQuest Research stated: “Specifically, the services sector, which was the largest recipient of DMB credit, and accounting for 52 per cent of the total credit, increased slightly by one per cent q/q to N20.1 billion.
“The industry sector also experienced flattish growth (+1% m/m) to N16.7 billion. Consequently, its share of contribution was unchanged at 43.2 per cent. “Conversely, the agricultural sector, which retained its position as the lowest recipient of DMBs credit allocation, declined by -4 percent m/m to N1.8 billion in Aug ’23.
“Notably, banks’ credit growth to consumers was more significant. It grew by 17 per cent m/m to N2.6 billion. The m/m expansion in consumers’ credit was primarily due to a rise in demand for loans by financial agents.
The heightened demand for consumer loans reflects the rising cost of living due to the high inflationary environment.” In a recent report, Afrin- vest Research predicted that the CBN is likely to adopt a restrictive stance in the first half of this year in order to counter expected large in- flows.