The total amount of net loans given to the private sector increased by N1.3 trillion in the first quarter of 2023 to N43 trillion. According to data from Nigeria’s national bank, this is the case.
Consumer loans, small company loans, commercial loans, structured finance, trade finance, mortgages, and other loans made to businesses and individuals are examples of credit to the private sector.
Despite central bank policies aimed at reducing the amount of cash in circulation, Nigerian banks increased lending. The central bank has also hiked interest rates in the last five monetary policy sessions, citing high inflation and the need to keep the money supply under control.
However, according to the most recent data, financial institutions extended more credit to the private sector in the month under review. Total government credit, on the other hand, declined slightly from N28.4 trillion to N27.5 trillion, or N900 billion. This is also the second-largest reduction in private-sector loans since 2020.
Readings from some commercial bank earnings guidance indicate that they are not inclined to aggressive lending this year, which is why this data is surprising.
What The Increase In the Private Sector Suggests
Despite the central bank’s efforts to reduce cash circulation and control inflation, the increase in lending to the private sector suggests that Nigerian banks are willing to take risks and invest in the economy. This could assist to stimulate economic growth by giving businesses the financing they need to expand, hire more workers, and boost productivity.
The impact of the old naira note crisis is expected to reduce GDP growth in the first quarter of 2023, according to most economists. The growth in lending to the private sector also explains why the central bank’s data on money supply showed it grew to N51.1 trillion, a new high for the central bank under Godwin Emefiele.
The decrease in loans to the government may have harmful consequences. Loans are used by the government to fund operations and investments in infrastructure, healthcare, education, and other essential sectors, especially while the country faces fiscal issues.
Conclusion
If the fall in government credit continues, it may lead to a reduction in government spending, stifling economic growth and lowering the standard of living for many Nigerians. Suppliers to the government may have encountered delayed payments as a result of the government’s credit crunch.
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