Banks’ annual loans to businesses hit N6.69tr – CBN

The value of new cash deposits attracted by banks to their vaults in the last one year rose to N6.69 trillion, the Central Bank of Nigeria (CBN) has announced.

The apex bank’s Deputy Governor, Financial System Stability, Mrs. Aishah Ahmad, who broke the news said commercial banks received additional N6.69 trillion new deposits from depositors between end-February 2021 and end-February 2022.

The total deposits in banks rose from N32.69 trillion in February 2021 to N39.38 trillion in February 2022, creating N6.69 trillion deposit growth.

In her personal notes to the Monetary Policy Committee (MPC) members posted on the CBN’s website, Mrs. Ahmad said the financial system remains resilient and continues to provide significant support for domestic economic recovery.

“Data provided by the CBN staff showed stability in broad financial soundness indicators and sustained improvement in asset quality, alongside growing credit to the private sector,” she said.

According to her, capital adequacy as at February 2022 was at 14.40 per cent. Industry liquidity was also strong at 43.5 per cent over the same period while the non-performing loans ratio declined further to 4.8 per cent in February 2022, from 4.94 per cent in December 2021.

Mrs. Ahmad, said the state of the industry reflects the case-by-case review of regulatory forbearance, effects of the Global Standing Instruction (GSI) policy, and sound industry risk management practices.

“Notably, total assets rose to N62.01 trillion in February 2022 from N52.32 trillion in February 2021, while total deposits rose to N39.38 trillion from N32.69 trillion over the same period,” she stated.

Continuing, she disclosed that banks’ credit to customers also increased by N4.13 trillion between end- February 2021 and end-February 2022 with significant growth in credit to manufacturing, general commerce, and oil and gas sectors.

“The continued growth in credit particularly to output enhancing sectors is expected to further support economic recovery. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system from lingering macroeconomic risks,” she stated.

On the deposit rates, she noted that the monthly weighted average Open Buyback (OBB) and Inter- bank call rates decreased to 5.81 and 9.30 per cent in February 2022 from 6.00 and 16.00 per cent in January 2022, respectively.

The decrease in the rates, she said, signifies loose liquidity conditions in the banking system, which could worsen inflation conditions if unchecked.

“It would also be important to sustain the liquidity management actions of the CBN, which have helped prevent overheating of the economy following increased liquidity injections in response to spillover effects of the pandemic,” she advised.

Continuing, Mrs. Ahmad, said the uptick in core inflation was mostly due to rising energy prices as a result of the recent scarcity of Premium Motor Spirit (PMS), rise in the cost of Automotive Gas Oil (AGO), and hike in electricity tariff.

“While the recent spike in domestic prices may be transitory, it is prudent to take forward-looking policy decisions to mitigate unforeseen adverse price developments and manage inflation expectations. Sustained interventions by the Central Bank of Nigeria (CBN) to improve food supply alongside fiscal efforts to contain long standing structural constraints are important considerations in that regard,” she said.

She said the “Race to S$200 billion in FX Repatriation” policy of the CBN was designed to boost non-oil export receipts is expected to improve foreign exchange supply and strengthen relative exchange rate stability.

This policy complements fiscal sector initiatives to diversify the economy and enhances the renewed focus on improving domestic economic productivity.