UMORU ABDULKADIR
The Central Bank of Nigeria (CBN) has said in its newly released “Credit Conditions Survey Report for Fourth Quarter of 2019, that the overall availability of credit to the corporate sector will further rise in the first quarter of this year, considering the increase recorded in the fourth quarter of 2019.
Previous CBN report noted that credit to the economy was N26,41 trillion as at November last year, rising from N22.94 trillion in January 2019. The increase represents N3.47 trillion or 15 per cent.
The latest apex bank survey conducted from December 16, 2019, to January 3, 2020, said the increase in the credit condition was driven by market share objectives, changing sector-specific risks, favourable economic conditions, changing appetite for risk and improved liquidity conditions.
During the period in focus, lenders reported that the prevailing commercial property prices negatively influenced credit availability of the commercial real estate sector in the current quarter.
Part of the report reads thus: “Availability of credit increased for all business sizes in Q4 2019. Lenders expect the same trend in the next quarter. Spreads between bank lending rates and MPR on approved new loan applications narrowed for all firm sizes in Q4 2019 and were expected to narrow for all business sizes in Q1 2020.”
It also noted that the proportion of loan applications approved for all business sizes increased in the current quarter and were expected to further increase in Q1 2020, even though lenders required stronger loan covenants from all business sizes, except for large business in the current quarter.
They, however, reported that they would require stronger loan covenants for all firm sized businesses in the next quarter, except for OFCs.
Similarly, for Q4 2019, fees/commissions on approved new loan applications fell for all firm sizes, except for large PNFCs, meanwhile, lenders expect fees/commissions on approved new loan applications to fall for all firm sized businesses except for OFCs in the first quarter of this year.
It further disclosed that in the fourth quarter of 2019, all firm sizes benefitted from an increase in maximum credit lines on approved new loan applications in except for OFCs even as all firm sizes are also expected to benefit from an increase in maximum credit lines on approved new loan applications in Q4 2019.
In terms of demand for collateral from loans seekers, the report noted that more collateral requirements were demanded from all firm sizes on an approved new loan application in the last quarter of the previous year and lenders expect to demand more collateral from all firm sizes in the next quarter.
In the same token, demand for corporate lending increased for all Q4 of 2019 and was expected to increase for all business sizes in the Q1 2020 mostly to be influenced by demand for lending in inventory finance and capital investment, and they were expected to remain the main drivers in the next quarter.
Corporate loan performance as measured by the default rates improved for all businesses in Q4 2019. Lenders still expect lower default rates on lending to all sized businesses in the next quarter.
While the average credit quality on newly arranged PNFCs borrowing facilities improved for both quarters, the target hold levels2 associated with corporate lending also improved in the current quarter and are expected to improve further in Q1 2020.
“Loan tenors on new corporate loans improved in Q4 2019 and are expected to improve further in the next quarter. Drawdown on committed lines by PNFCs improved in the current quarter, and is expected to improve in the next quarter,” the report stated.
It also said the availability of loans without collateral will fall in the first quarter of the year, adding that the availability of secured credit to households increased in Q4 2019 and was also expected to increase in the next quarter.
“Improving liquidity positions was the major factor for the increase in secured credit, it said.
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