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The biggest banks in the country have experienced consistent increases in consumer loans as the economy fully recovers from the coronavirus pandemic. 

The most recent earnings report reveals that all of the biggest lenders increased their risk-weighted assets as additional revenue from non-interest sources also increased. 

According to information acquired by MoneyCentral, the total loans and advances made by banks increased by 16.68 percent to N25.56 trillion in September 2022. 

Interestingly, cumulative loans increased by 35.15 percent in 2019 but decreased by 5.70 percent in 2018; this is lower than the growth of 23.70 percent in 2021 but higher than the increase of 14.57 percent in 2020.

Banks depend on loan growth to produce interest income, and when the economy is doing better, they can engage in financial intermediation. 

Business operations were stopped by the coronavirus epidemic two years ago, which compelled the government to implement a lockdown policy, and the nation entered its second recession in five years in 2020. 

Vaccine distribution and the easing of the lockdown policy, however, helped the economy bounce back to growth in the final quarter of 2020. 

According to the National Bureau of Statistics, Nigeria’s gross domestic product (GDP) increased by 3.54% year over year in real terms in the second quarter of 2022, which is an improvement over the 3.11% growth seen in the first quarter.

According to analysts, the central bank’s increase in the minimum loans-to-deposit ratio and a decline in yield over the previous two years compelled lenders to expand lending facilities to the real sector of the economy and amplify risk-weighted assets. 

The third quarter of 2022 saw a growth in total credit to the Nigerian economy, according to information from the Central Bank of Nigeria (CBN) included in the Money and Credit Statistics (Q3 2022). In Q3 2022, bank credit to the economy increased year over year (YoY) by 34% to N63.3 trillion from N46.9 trillion during the same time in 2021.

The entire credit consists of N40.5 trillion in private sector borrowing and N22.8 trillion in government borrowing. Government borrowing surged more quickly than private sector borrowing; year over year, government borrowing increased by 75% whereas private sector borrowing increased by 19%. 

According to a statement from the central bank, the rise in credit to the government is consistent with the rise in government debt, which raises concerns about the crowding-out effect of government borrowing on the availability of funds to private businesses for profitable investments.

“Consequently, the government should boost revenue collection and pursue innovative financing options to effectively fund its rising expenditure to minimise the rate of borrowing from the domestic financial market,” said the regulator.

However, given that the era of easy money from fixed income is returning, there are worries that the steady increase in interest rates on the basis of the regulator’s proactive monetary stance could cause banks to slow down on lending. 

From N3.59 billion the year before to N4.91 trillion during the review period, Zenith Bank’s total loans climbed by 36.68 percent. From N4.49 trillion in September 2021 to N4.95 trillion in September 2022, Access Bank’s total loans increased by 10.25 percent. 

As of September 2022, First Bank Holdings Plc’s total loans increased by 17.68% to N4.77 trillion.


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