Bank loans,collateral to rise in first quarter –CBN


The Central Bank of Nigeria Credit Conditions Survey Report has revealed that companies of all sizes will demand more loans during the first quarter of 2018 and commercial banks have indicated plans to demand more collateral.

The report also disclosed that the Deposit Money Banks in the country recorded higher default rates on credit card loans and personal/overdraft loans during the last quarter of 2017.

CBN Governor, Mr Godwin Emefiele

The CBN Credit Conditions Survey Report covered the secured and unsecured lending activities of banks to households and companies during the fourth quarter of 2017 and the DMBs’ expectation for the first quarter of 2018.

The report, which was obtained by our correspondent on Sunday, read in part, “More collateral requirements were demanded from all firm sizes on approved new loan application in Q4 2017.  Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.

“Demand for corporate lending from small businesses, medium and large PNFCs increased in the current quarter, and were also expected to increase in the next quarter. Demand for overdrafts/personal loans in Q4 2017 was higher in comparison with other loan types. The most significant factors that influenced demand for lending in the review quarter were the increase in inventory finance and capital investment, and they were expected to remain the main drivers in the next quarter.”

On credit card and personal loans, the CBN report said, “Lenders experienced higher default rates on credit card and overdrafts/personal lending to households in the current quarter. They however, expect improvement in default rates in the next quarter. Losses given default on total unsecured loans to households worsened in Q4 2017 but were expected to improve in the next quarter.”

According to the CBN, the DMBs reported that spreads on credit card lending narrowed in Q4 2017 and was expected to remain narrow in the next quarter.

The survey added that spreads on unsecured overdrafts/personal loans on approved new loan applications narrowed in the last quarter and was expected to further narrow in the next quarter. Overall, spreads on unsecured lending narrowed in the last quarter, and was expected to narrow in the next quarter, the CBN report stated.

“Maximum maturities on approved unsecured new loan applications were shortened in the current quarter, and lenders anticipated that they will remain shortened in the next quarter,” it added.

The survey by CBN noted that overall availability of credit to the corporate sector increased in fourth quarter of 2017 and was expected to increase in first quarter of 2018.

The report said this was driven by brighter economic outlook, market share objectives, favourable liquidity conditions and tight wholesale funding conditions.

It added, “Changes in spreads between bank rates and MPR on approved new loan applications to the small businesses and OFCs narrowed in fourth quarter of 2017, while that of medium and large PNFCs widened. Spreads were expected to narrow for small businesses but widen for all other business sizes in first quarter of 2018.”


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