By Charles Abuede
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The Central Bank of Nigeria (CBN) says it foresees an increase in secured credit to households in the first quarter of 2021 with changing economic outlook and increased market share objectives being likely contributing factors to the increased supply of credit, the apex bank reported in its credit conditions survey report for the fourth quarter of 2020.
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The survey conducted and published by the statistics department of the CBN revealed that the proportion of loan applications approved in Q4 2020 decreased, as lenders tightened their credit scoring criteria. But lenders are looking forward to further tighten the credit scoring criteria as they pre-empt the proportion of approved households’ loan applications to increase in Q1 2021.
The report also showed that household demand for consumer loans increased in Q4 2020 and is expected to increase in the first three months of 2021. Similarly, the demand for mortgage or re-mortgaging from households increased in Q4 2020 and is expected to also increase in Q1 2021.
A further examination of the outlook from the survey shows that the overall availability of credit to the corporate sector increased in the last quarter of 2020 and is also anticipated to rise in the first quarter of 2021, and that this will be majorly driven by factors such as changing sector-specific risks, market share objectives, changing appetite for risk, changing economic conditions and changing liquidity conditions. Similarly, the availability of credit for all business sizes saw an uptick in the fourth quarter of 2020 while the same trend is expected to rise in Q1 2021.
Still on the outlook and expectations as projected by the apex bank, the proportion of loan applications permitted for all company sizes improved in the Q4 2020 and were expected to further increase in Q1 2021 as lenders demanded stronger loan contracts from all firm sizes in both Q4 2020 and Q1 2021. Thus, more collateral requirements were demanded from all firm sizes on the approved new loan applications in Q4 2020 and lenders are expecting to demand higher collateral from all firm sizes by the first quarter of 2021.
However, as revealed in the survey, while the spreads between bank lending rates and MPR on approved new loan requests expanded for all firm sizes except medium Public Non-Financial Corporations (PNFCs) in the period under review, lenders expect the spread on bank lending rates and MPR on approved new loan applications to also widen for all firms sizes except for medium PNFC, which is expected to remain unchanged Q1 2021.
But the secured loan performance, as measured by default rates, deteriorated in Q4 2020 and is expected to remain unchanged in the first three months of 2021 as bank lenders reported low losses given default by households in Q4 2020, and they also expect lower losses in Q1 2021.
Meanwhile, the fourth quarter of 2020 credit condition survey for households, small businesses and corporate entities by the central bank portends an increased availability of secured, unsecured and corporate entities. Though, the spreads on overall secured lending to households narrowed in Q4 2020 and are expected to further narrow in Q1 2021 except for unsecured and all firm sized lending to the household, which is expected to expand.
Nigeria November 21, 2019