January 17, 2022/CSL Research
Based on the recent money and credit statistics by the CBN as of November 2021 showed a 2.0% m/m increased lending to the private sector, reaching another high of N35.3tn in November from N34.5tn as of October 2021. Yearly, private sector credit was also up by 20.0% y/y from N29.4tn in November 2020. Similarly, credit to the government also improved, up 0.7% m/m to N13.0tn from N12.9tn in October 2021.
The m/m and y/y expansion in private sector credit reflects the CBN’s continued efforts to revive the ailing economy. The CBN has been relatively successful at supporting output recovery. One, in 2021, the apex bank maintained the benchmark Monetary Policy Rate (MPR) at 11.5%, avoiding any further tightening that could stifle credit growth. While a huge proportion of the credit was towards sectors such as agriculture, oil & gas, and manufacturing, the Non-Performing Loan (NPL) ratio of Deposit Money Banks (DMBs) have remained moderate as CBN allowed banks to restructure loans to the strained sectors.
Increasing oil prices have also been supportive as many of the restructured loans to the oil and gas sector are being reported to be meeting the new terms. That said, lower yields on investment securities have forced many banks to increase lending to the real sector of the economy. In the 9 months of 2021, based on released numbers, Zenith Bank recorded a net loan growth of 8.7% relative to December 2020. Also, Access (+16.4%), UBA (+12.4%), GTCO (+4.5%), Stanbic (+31.5%), and Sterling (+13.4%) recorded a net loan growth when compared to December 2020. Looking ahead, we expect an improvement in loan growth over 2021. We forecast average loan growth of 15% for the banks under our coverage.