Nigeria’s private sector credit growth is ‘subdued’ -Expert

Access to credit has remained a major challenge in Nigeria.

Nigeria’s credit growth slowed to 8.1 per cent Year-on-Year (YoY) in March, from 9.0 per cent YoY in February, Renaissance Capital, an investment bank, says.

“Private sector credit growth remains subdued. Following credit growth’s acceleration in February – for the first time in six months – to 9.0 per cent YoY (compared to 3.3 per cent in January), it slowed to 8.1 per cent YoY in March,” Yvonne Mhango, Sub-Saharan Africa Economist, Renaissance Capital, said.

On a Month-on-Month (MoM) basis, credit growth declined by 0.1 per cent in March following growth of 0.9 per cent in February.

“Notably at first quarter 2013, the amount of credit extended to the private sector was lower than it was at fourth quarter 2012. We think the pickup in Treasury Bill yields since March (to 10.49 per cent on 10 April from 9.42 per cent in February) suggests limited upside for credit growth in the short term” she said. “We maintain our mid-teens YoY credit growth projection for 2013 year end but think there is downside risk to this view.”

According to Ms. Mhango, weak credit growth and the softening of inflation in the first quarter of 2013 may add to arguments to cut the Monetary Policy Rate (MPR) and/or reduce the cash reserve requirement at the next Monetary Policy Committee meeting in May.

Access to credit has remained a major challenge in Nigeria for years. The situation was further highlighted after the banking reform in 2009 as banks remain reluctant to create assets.

Banks say except infrastructures are put in place to ensure businesses survival, they will not invest in businesses- especially, small and medium scale.

This week, the Nigerian Stock Exchange, NSE, launched an Alternative Securities Market, ASeM, for small and medium scale businesses to raise capital from the public.

Olusoji Salako, National President, Association of Senior Staff of Banks, Insurance and Other Financial Institutions, ASSBIFI, said he is not certain this platform would bridge the credit gap.

“It is a 50/50 situation. Raising credit via these means is not of 100 per cent certainty. Not all investors would be interested in small/medium scale businesses, some might, some might not. It is in the hands of the people, which means it is dependent on people’s financial capacities, their level of liquidity,” he said.

According to Mr. Salako, some people are still living below the poverty line and may not have funds to invest. He also highlighted the Stock Market Crisis and how shareholders and investors, some who had their fingers burnt, are still trying to regain confidence in the Main Market.

Another challenge is that not all businesses would be qualified to raise funds on that platform no matter how relaxed the policies and regulation would be.

“It is a new innovation, you can’t expect a buoyant response immediately” Mr. Salako said, adding that with time, it may begin to fill up some credit gap.