Total domestic credit extended by Nigerian banking institutions to the private sector grew by 11.7 per cent in the third quarter ended August 2020, compared with 11.4 percent which was recorded in the previous month.
Central Bank of Nigeria in its latest economic report said the development was due to an uptick in economic activities, as shown by a rise in the Purchasing Managers’ Index (PMI) to 48.5 basis points at end-August 2020, compared with 44.9 index points at end-July 2020 and growing household demand.
According to the apex bank, the sectoral credit utilisation by the other sectors of the economy, at N19, 246.13 billion, rose by 0.7per cent at the end of August 2020 and above its level at end-July 2020.
A breakdown of the credit showed that the industry and services sectors constituted 37.9 per cent of the total disbursement, compared with 38.1 per cent and 37.8 per cent, respectively.
The data revealed that the agricultural sector accounted for 4.8 per cent at end-August, below 4.9 per cent in the previous month, while construction and Government sectors increased by 0.1percentage point to 4.7 per cent and 8.1 per cent, respectively, in the review period of 2020.
According to the apex bank’s economic report, global financial markets remained volatile amidst the lingering COVID-19 pandemic.
“Although financial markets have shown signs of moderate recovery, conditions were still relatively tight, as investors remain cautious of a possible second round of lockdowns. However, the financial sector remained stable in the review period as the key financial soundness indicators improved,” it said.
The CBN noted that the health of banks were generally sound, as their assets quality, measured by the ratio of Non-Performing Loans (NPLs) to industry total outstanding loans, stood at 6.1per cent at end-August 2020, below the 6.4 per cent recorded at end-July, but was above the 5.0 per cent prudential requirement.
The industry Capital Adequacy Ratio (CAR) also rose by 0.7 percentage point to 15.3per cent at the comparable period of 2020, relative to 14.6 per cent at end-July. The ratio exceeded the regulatory benchmark of 10.0 per cent by 5.3percentage points. At 61.3 per cent, the liquidity ratio, decelerated to the preceding month’s level, but remained above the 30.0 per cent benchmark.
The development was attributed to the continued implementation of the Bank’s Loan-to-Deposit ratio policy. The banking system recorded adequate liquidity levels, moderate enough to enhance financial intermediation.
This was buoyed by the decline in key lending and money market rates in the review period.
Specifically, adequate liquidity levels arose from payments of fiscal disbursements to the three tiers of Government (FAAC), CBN bills and treasury bills maturities in the banking system during the review period.
Other sources of liquidity were from the sustained interventions by the CBN to the healthcare sector of the economy.
The Bank conducted the Open Market Operation (OMO) and discount window activities to moderate liquidity in August 2020. The tenors of the instruments were from 96 to 362 days.
Total amounts offered, subscribed and allotted, were N130.00 billion, N213.07 billion and N117.86 billion, respectively, with a bid rate of 6.4 per cent, while the stop rate was 6.9 per cent.
Repayment of matured CBN bills stood at N571.40 billion, a net injection of N453.54 billion through this medium.
At the Government securities market, NTBs and long-term FGN Bonds were issued at the primary market on behalf of the Debt Management Office (DMO). NTBs of 91-, 182-and 364-day tenors, amounting to N254.38 billion, N340.11 billion and N254.38 billion, respectively, were offered, subscribed and allotted.
The bid-cover ratio of 1.5 for 91-day and 1.3 apiece for 182-day and 364-day tenors, showed that investors were risk averse, as the short-term instrument was more patronised than the longer-term instruments. FGN Bonds of 10-, 15-and 30-year tranches were reopened and offered for sale, while a 25-year new issue was offered for sale in the review period.
Terms to maturity of the Bonds were 5 years, 5 months to 29 years, 7 months. Total amounts offered, subscribed and allotted, were N150.00 billion, N242.14 billion and N116.65 billion, respectively.
Allotment on non-competitive basis was N9.50 billion. The oversubscription in the 30-year tenored instrument was due to renewed confidence by investors in the market and optimism in a more stable and improved economy on a longer horizon. The bid and marginal rates on all tenors were 8.7 per cent and 8.3 per cent, respectively.