Consumer Credit Grows to N782.6bn

The recent Financial Stability Report of the Central Bank of Nigeria disclosed that the value of consumer credit in the country increased by 24.55% to N782.6bn as at December 2013 compared with a marginal growth of 0.8% in the first half of 2013.

At the end of December 2013, total bank loans and advances to the different sectors of the economy grew by 13.9% to N10.043trn. the highest growth rate was recorded by the oil and gas sector with a share of 24.4%, followed by manufacturing (12.9%) and the general sector (11.6%).

The report also indicated that the share of the agricultural sector declined to 3.7% from 4.0% in the first half of 2013.

The Apex bank also disclosed that banks were unable to lend long term loans in the period under review, especially to real sector due to the continued dominance of short-term deposits.

The quality of assets of the banking industry also improved slightly in the second half of 2013, compared with the first half. The ratio of non-performing loans (NPLs) to total loans also dropped by 0.5% to 3.2% as at the end of December last year, from 3.7% as at June last year. The improvement in asset quality was as a result of stricter adherence to credit risk management policies and standards by banks.

“Liquidity stress test was conducted at end-December 2013 to assess the resilience of the banking industry to liquidity and funding shocks, using the Implied Cash Flow Analysis (ICFA) and Maturity Mismatch/Rollover Risk approaches,” it disclosed.

According to the report, the banking industry remained competitive in both deposits and assets as revealed by the respective Herfindahl-Hirschman Index (HHI) of 798.08 and 750.16 for total deposits and assets and deposits of the six largest banks.

In terms of cross-border collaboration, the report stated that “Nigerian banks continued to expand their operations outside the country with the opening of seven subsidiaries across the African continent during the review period, bringing the total to 64 at end-December 2013.

‘The increase in foreign subsidiaries was as a result of four acquisitions in West Africa and three in East Africa, while one bank divested from a subsidiary in West Africa.

“The cross-border expansion of Nigerian banks has continued to be motivated by several factors which include profit maximisation, risk diversification, the demand pull from corporate clients, and increasing business opportunities.”

However, it pointed out that the expansion exposes the Nigerian financial system to regional contagion risk, insisting that a major thrust in managing the contagion risk is the timely exchange of information amongst home and host regulatory authorities.

“This is facilitated through the execution of MoUs, the activities of the College of Supervisors, and cross-border examination,” it stated.

The report also showed that the number of operating finance companies (FCs) fell to 61 as at the end of December 2013, from 65 as at June 2013.

This, it attributed to the voluntary liquidation of two FCs and discontinuation of finance company business by two others, while one was sealed up and is being investigated by the Economic and Financial Crimes Commission.

However, one new FC was licensed in the period under review. Total assets of FCs increased to N103.05bn as at the end of December 2013, from N82.13bn as at June 2013. This reflected a growth of 25.47%.

Similarly, paid-up capital in the sub-sector increased by 3.23% to N14.69bn as at December, from N14.23bn as at June last year. Also, aggregate reserves rose to N3.59bn as at the period under review, from N0.07bn as at June.