The Central Bank of Nigeria’s (CBN) most recent monthly economic report shows that deposit money banks (DMB’s) total credit extension to the economy increased to N38.3billion in Jul 2023 from N37.5billion in the previous month.
Specifically, the report shows that credit extension to the leading services sector was up by 3percent month on month (m/m) to N19.9billion. Consequently, its share of the total credit increased to 52.0percent from 51.6percent the previous month.
On a year on year basis (y/y) basis, their credit lending to the economy grew markedly by 39 percent y/y.
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The modest credit growth quarter on quarter (q/q) is attributable to banks’ tighter risk management framework due to the high-interest rate environment.
According to the report, DMBs’ credit growth to the services, industry, and agriculture sectors saw a slight m/m increase.
With respect to the three economic classifications, analysts from FBNQuest said the services sector has continued to outperform all other sectors for the past ten quarters. Additionally, the sector has been the primary driver of expansion in Nigeria’s economic activity.
The sector’s consistent robust growth has been supported by strong performances in sectors such as financial and insurance, information and communications, and trade.
The industry sector was the second-largest recipient of DMBs credit extension. It grew by a flattish (+1% m/m).
However, its contribution to the total share of credit reduced to 43.5 percent from 43.2percent.
Although DMBs credit growth to the agriculture sector increased by a paltry 1percent m/m, its share of contribution to total credit declined to 4.8percent from 4.9percent.
The report also shows that banks’ loans to consumers decreased by -3percent m/m to N2.6billion. Consequently, its share of the total credit allocation was reduced to 6.7percent from 7percent the previous month.
Underscoring the decline in consumer loans is the weaker demand for household credit caused by the elevated interest rate environment.
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