The Central Bank of Nigeria (CBN) has said that banks loans to the private sector and the government declined by N24t trillion in March this year.
In a money and credit data published last week, the apex bank said loans to the private sector fell from N80.6 trillion in February to N71.21 trillion translating to roughly N9.65 trillion decline.
Similarly, loans to the government declined to N19.59 trillion in March from N33.93 trillion in February representing a month-on-month decline of N14.34 trillion naira.
This brought the cumulative decline of loan to both sectors to N23.9 trillion for the period under review.
Credit to the private sector describes monetary resources given to the private sector, such as advances and loans, purchases of non-equity securities, trade credits, and other accounts receivable, which create a claim for repayment.
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In January, credit to investors was N76.29 trillion while credit to the government stood at N36.18 trillion in January.
The decline in credit to the private sector and government can be attributed to CBN’s monetary tightening policy.
Also, in line with its monetary tightening, CBN announced a downward review of the loan-to-deposit ratio (LDR) from 65 percent to 50 percent on April 17.
LDR is used to assess a bank’s liquidity by comparing its total loans to its total deposits.
An increase in the loan-to-deposit ratio allows banks to expand their credits to businesses and individuals, however, a decline in LDR reduces their ability to loan customers from depositors’ funds.
By: Babajide Okeowo
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