…as bank credit to private sector grow by 4.8%
Consumer credit outstanding in the third quarter of 2020 increased by 0.9 and 16.6 per cent above the levels at the end of the preceding quarter and the end of the corresponding period of 2019, respectively.
According to the Central Bank of Nigeria, economic report for the third quarter of 2020, the ratio of outstanding consumer credit to claims on the private sector, fell to 8.11 per cent below both the level at the end of the preceding quarter and corresponding quarter of 2019. It is noteworthy that although, consumer credit grew quarter-on-quarter, its ratio to claims on private sector fell owing to increase in claims on the private sector.
The breakdown of consumer loans indicated that personal loan was the main form of consumer credit, advanced to customers with low risk of default.
In terms of credit utilisation, industrial and services sectors accounted for the largest share in Q3 2020. Bank credit to the core private sector grew by 4.8 per cent at end-September 2020, compared with 1.7 per cent at end-June 2020.
Analysis of the credit composition showed that industry accounted for 37.2 per cent, compared with 37.7 per cent at end-June 2020. Services and agriculture remained unchanged at 38.4 per cent and 4.8 per cent, at end-June 2020 and end-September 2020, respectively.
The external sector was yet to recover from the lingering effects of the COVID-19 pandemic. The impact of unsteady crude oil prices, global demand, global financial market instability, reverse capital flows, remittances and external debt accumulation, continued to weigh heavily on the performance of the external sector.
COVID-19 cases have spiked in several countries leading to a second round of lockdown. This has created anxiety that the pandemic may last longer than envisaged, causing more damage to economies by contracting GDP, increasing public debt and decreasing aggregate demand.
Despite expected inventory draws in the coming months, EIA expects high inventory levels and surplus crude oil production capacity to limit oil price increases. The lull in global trade in the medium-term has economic implications for investment and productivity growth, especially in developing countries relying on trade-led growth strategies. This development accounted for the dearth of foreign capital inflow witnessed in most developing economies and emerging markets. This consequently resulted in exchange rate pressure.
According to a World Bank reporting, global trade growth could be even more negative in 2020 than initially predicted. It is expected that weak economic and financial fundamentals prior to the COVID-19 crisis would lead to declines in foreign exchange reserves as central banks try to stabilise their currencies. Thus, the conditions in the oil market, exchange rate pressure, Bank’s intervention in the foreign exchange market as well as the state of international financial markets and productivity of the economy, would continue to determine the level of external reserves.
According to the report, the general insecurity, occasioned by insurgency, banditry and kidnapping have remained a big challenge in the country, as it continues to affect the productive sectors, especially, the agricultural sector, making it unattractive to both foreign and local investors.