Personal loan up by 0.8% as retail credit declines

Desposit money banks are showing more comfort in assets financing than offering retail loans as personal loans increased by 0.8 percent in November 2020, while retail credit declined by 1.8 percent.

A personal loan according to Forbes Advisor is financing extended by an online or traditional lender that you can use for a range of personal purposes.

Personal loans offer is gaining traction because some lenders give it out at low interest rate. For instance, Standard Chatered offers personal loan at 1.08 percent per month with flexible tenor of up to 60 days.

These loans are fully unsecured with no security required. “We can help you move your loan with another bank to take advantage of our competitive terms,” the Bank stated.

Retail loans according to Kabbage Resources include a vast range of different loans. Personal loans such as car loans, mortgages, signature loans and credit cards all fall into the category of retail loans, but business loans can also fall into the category of retail loans.

The Central Bank of Nigeria (CBN)’S economic report showed that Consumer credit outstanding, at N1.53 trillion in November 2020, rose by 4.3 per cent and 6.8 per cent relative to the level at the end of the preceding period and the corresponding period of 2019, respectively.

The ratio of consumer credit to private sector credit increased marginally to 8.4 per cent at the end of November 2020, from 8.2 per cent at the end of October 2020.

The increase in the ratio was due, largely, to the rise in the volume of loans and advances disbursed to businesses and individuals by other depository corporations.

Bank customers continued to express confidence in the banking system, despite the lingering effects of the COVID-19 pandemic and the recession in the economy. As a result, Depository Corporations’ transferable and other deposits grew, due to increased demand, savings, time, and foreign currency deposits by bank customers.

However, demand for cash also surged, on account of the increasing need for cash by households for the end of year. Consequently, currency outside depository corporations, rose by 11.6 per cent, causing a slight deterioration in intermediation efficiency, as the ratio of currency outside depository corporations to broad money rose by 0.1 percentage point to 6.2 per cent, above the level at endOctober 2020. The increase in transferable deposits of depository corporations and currency outside depository corporations meant that narrow money supply (M1) expanded by 39.2 per cent at end-november 2020.

The report noted that expansion in private sector credit was sustained, as the monetary authority continued to take measures to furtherstimulate economic activities, boost growth and quicken economic recovery. Credit to the private sector grew by 12.3 per cent at endNovember 2020, compared with 10.2 per cent in the preceding month.

The development was due to an uptick in economic activities, as shown by a rise in PMI to 50.2 index point at end-november 2020, compared with 49.4 index point at end-october 2020. Sectoral credit utilisation by the “’other” sectors of the economy, at N19,610.85 billion, rose by 1.7 per cent at endNovember 2020, above its level at end-october 2020.

A breakdown of the credit showed that the industrial sector increased by 0.1 percentage point to 37.1 per cent of the total disbursement, over the October 2020 level. The services, government, agricultural and construction sectors contributed 38.4 per cent, 8.4 per cent, 4.9 per cent and 4.8 per cent at end-november 2020, respectively, same as in the preceding month. However, the trade and general commerce sector declined by 0.1 percentage point to 6.4 per cent in November 2020.