Consumer Credit in Nigeria Grows by 24.5%

The value of consumer credit in the country grew by 24.5 per cent to N782.6 billion as at December 2013, compared with a marginal growth of 0.8 per cent in the first half of 2013.

The Central Bank of Nigeria (CBN) disclosed this in its latest Financial Stability Report posted on its website at the weekend.

As a ratio of credit to the core private sector, consumer credit constituted five per cent, compared with the 4.2 per cent it stood at the end of June 2013, the report also stated.

Total bank loans and advances to the various sectors of the economy grew by 13.9 per cent to N10.043 trillion at the end of December 2013. The oil and gas sector recorded the highest growth rate, with a share of 24.4 per cent, followed by manufacturing (12.9 per cent) and the general sector (11.6 per cent).

Furthermore, the report showed that

the share of the agricultural sector declined to 3.7 per cent, from 4.0 per cent in the first half of 2013.

According to the central bank, continued dominance of short-term deposits constrained the ability of banks to lend long term loans in the period under review, especially to the real sector.

Also, the quality of assets of the banking industry improved slightly in the second half of 2013, compared with the first half.

The ratio of non-performing loans (NPLs) to total loans also dropped by 0.5 per cent to 3.2 per cent as at the end of December last year, from 3.7 per cent as at June last year.

The improvement in asset quality was attributed to stricter adherence to credit risk management policies and standards by banks.

“Liquidity stress test was conducted at end-December 2013 to assess the resilience of the banking industry to liquidity and funding shocks, using the Implied Cash Flow Analysis (ICFA) and Maturity Mismatch/Rollover Risk approaches,” it disclosed.

According to the report, the banking industry remained competitive in both deposits and assets as revealed by the respective Herfindahl-Hirschman Index (HHI) of 798.08 and 750.16 for total deposits and assets and deposits of the six largest banks.

In terms of cross-border collaboration, the report stated that “Nigerian banks continued to expand their operations outside the country with the opening of seven subsidiaries across the African continent during the review period, bringing the total to 64 at end-December 2013.

‘The increase in foreign subsidiaries was as a result of four acquisitions in West Africa and three in East Africa, while one bank divested from a subsidiary in West Africa.

“The cross-border expansion of Nigerian banks has continued to be motivated by several factors which include profit maximisation, risk diversification, the demand pull from corporate clients, and increasing business opportunities.”

However, it pointed out that the expansion exposes the Nigerian financial system to regional contagion risk, insisting that a major thrust in managing the contagion risk is the timely exchange of information amongst home and host regulatory authorities.

“This is facilitated through the execution of MoUs, the activities of the College of Supervisors, and cross-border examination,” it stated.

The report also showed that the number of operating finance companies (FCs) fell to 61 as at the end of December 2013, from 65 as at June 2013. This, it attributed to the voluntary liquidation of two FCs and discontinuation of finance company business by two others, while one was sealed up and is being investigated by the Economic and Financial Crimes Commission.

However, one new FC was licenced in the period under review.

Total assets of FCs increased to N103.05 billion as at the end of December 2013, from N82.13 billion as at June 2013. This reflected a growth of 25.47 per cent.

Similarly, paid-up capital in the sub-sector increased by 3.23 per cent to N14.69 billion as at December, from N14.23 billion as at June last year. Also, aggregate reserves rose to N3.59 billion as at the period under review, from N0.07 billion as at June.

Thisday