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Modest expansion in private sector credit

The recent money and credit statistics by the CBN as of November 2021 showed a 2.0% m/m increased lending to the private sector, reaching another high of N35.3tn in November, from N34.5tn as of October 2021. Yearly, private sector credit was also up by 20.0% y/y from N29.4tn in November 2020. Similarly, credit to the government also improved, up 0.7% m/m to N13.0tn, from N12.9tn in October 2021.

The m/m and y/y expansion in private sector credit reflects the CBN’s continued efforts to revive the ailing economy. The CBN has been relatively successful at supporting output recovery. One, in 2021, the apex bank maintained the benchmark Monetary Policy Rate (MPR) at 11.5%, avoiding any further tightening that could stifle credit growth. While a huge proportion of the credit was towards sectors such as agriculture, oil & gas, and manufacturing, the Non-Performing Loan (NPL) ratio of Deposit Money Banks (DMBs) have remained moderate as CBN allowed banks to restructure loans to the strained sectors.

Increasing oil prices have also been supportive as many of the restructured loans to the oil and gas sector are being reported to be meeting the new terms. That said, lower yields on investment securities have forced many banks to increase lending to the real sector of the economy. In the 9 months of 2021, based on released numbers, Zenith Bank recorded a net loan growth of 8.7% relative to December 2020. Also, Access (+16.4%), UBA (+12.4%), GTCO (+4.5%), Stanbic (+31.5%), and Sterling (+13.4%) recorded a net loan growth when compared to December 2020. Looking ahead, we expect an improvement in loan growth over 2021. We forecast average loan growth of 15% for the banks under our coverage.

• FX: Last week, the Naira traded at ₦416.02/US$ from ₦415.45/US$, in the interbank market.
• Bonds:In the secondary market for Federal Government of Nigeria (FGN) bonds, yields decreased across most maturities. The yields on the 3-yr FGN bond and 30-yr FGN bond decreased by 4 basis points, (to 9.05%), and 4bps (to 13.11%), respectively. Indicative yields on US Dollar Eurobonds issued by Nigerian entities were between 2.06% and 9.64%, depending on maturity.
• Oil: The price of Brent increased by 5.27%, from the previous week’s closing price of US$81.75bbl to US$86.06bbl.
• Equities:Last week, the NSE All-Share index advanced by 1.37%. The January 2022 Year-to-date return was 4.07%. The Consumer Goods sector gained 0.87%, on average. BUA Foods increased by 24.06%, while Nestle decreased by 7.81%. For the Brewers, Guinness rose by 5.76%, while Nigerian Breweries fell by 4.17%, respectively. The Industrial Goods sector advanced by 2.43%, on average. Dangote Cement gained 8.00%, while BUA Cement lost 0.72%. The NSE Banking sector gained 0.86%, on average. Fidelity advanced by 3.59%, while GTCO declined by 2.33%. In the Agriculture sector, Presco and Okomu remained unchanged.