The Central Bank of Nigeria (CBN) in its Credit Survey Report for December 2020, has presented trends and developments in credit conditions in the fourth quarter and the expectation in the first quarter of 2021.
The result of the survey which was conducted in December 2020 by the Apex bank, is based on lenders’ own responses and do not reflect the Bank’s views on credit conditions in the economy.
The Q4 2020 credit condition survey for households, small businesses and corporate entities indicated increased availability of secured, unsecured and corporate entities.
Read: Total transaction on NSE rose by 84.2% YoY despite N433.15bn foreign outflow
The proportion of loan applications approved in Q4 2020 decreased, as lenders tightened their credit scoring criteria. Lenders expect to further tighten the credit scoring criteria as they preempt the proportion of approved households’ loan applications to increase in Q1 2021.
Demand for credit
According to the report released by the Central Bank of Nigeria, the demand for secured lending for house purchase decreased in Q4 2020 but lenders expect demand for such lending to increase in Q1 2021.
On the other hand, the demand for total unsecured lending from households increased in Q4 2020 and is expected to maintain the upward trajectory in the Q1 2021.
Household demand for consumer loans increased in Q4 2020 and is expected to increase in Q1 2021
The demand for corporate credit for all business sizes except for small businesses and Other Financial Corporations (OFCs) in Q4 2020 but demand for all firm sizes is expected to increase in Q1 2021.
Despite the decline in the loan request, the proportion of approval by lenders dropped in Q4 2020.
Default rate
The default on secured loan worsened in Q4 whereas that of unsecured loan to households improved within the same period and is expected to improve further in Q1 2021.
Corporate loan performance rates worsened for small businesses and medium Public Non-Financial Corporations (PNFCs) but improved for large PNFCs and OFCS in Q4 2020.
By: Ifunanya Ikueze