Banks’ Consumer Loans Up 31% to N2.55trn on Rising Inflation

On the back of rising inflation rate in Nigeria, banks’ consumer loans rose by 31 per cent or N615.82 billion in one month to N2.55trillion in July 2022 from N1.93trillion in June 2022, the Central Bank of Nigeria (CBN) economic report for the month of July 2022 has revealed.

The CBN in the report stated that, “As a share of total claims on the private sector, consumer credit rose to 9.4 per cent, from 7.2 per cent at end-June. The increase in consumer credit could be attributed to general rise in prices which impacts on households’ budget and spending behaviour.”

The inflation rate opened in January 2022 at 15.6 per cent and increased to 19.64per cent in July 2022, according to the National Bureau of Statistics (NBS).

Banks’ consumer loans in its Year-on-Year (YoY) performance has increased by 38.34 per cent or N706.45billion from N1.84trillion in July 2021 to N2.55trillion in July 2022 amid increasing inflation rate and hike in CBN’s Monetary Policy Rate (MPR).

The CBN had in a report disclosed that banks’ consumer loans grew by 0.17 per cent to N2.08trillion in January 2022, from N2.07trillion in December 2021, accounting for 8.7 per cent of total credit to the private sector.

The report attributed the increase to growing confidence in the economy following gradual pick-up in economic activity as well as the various policies of the CBN, such as the loan-todeposit ratio (LDR) policy and the collateral registry.

However, the report for the month of July 2022 stated that a disaggregation of consumer credit shows personal loans stood at N1.93trillion billion, accounting for 75.7 per cent, while retail loans stood at N620.29 billion, and accounted for 24.3 per cent.

Consequently, banks raised lending rates, and the average prime lending rate increased to 12.1 per cent in July from 11.68 per cent in January, while average maximum lending rate rose to 27.61 per cent in July from 27.65 per cent in January.

A Tier-2 bank top executive who pleaded anonymity, explained to THISDAY that better margin hike due to steady increase in inflation rate and economy diversification boost banks consumer loans.

He noted that banks increased lending over better margins, stressing that consumers, salary earners and traders have increased borrowing from the banks.

The CBN in its second quarter of 2022 (Q2 2022) report had revealed that consumer credit outstanding declined by 15.2 per cent to N1.9trillion at end-June 2022, from N2.28trillion at the end-March 2022.

“The decline was partly due to decreased banking system liquidity and the ripple effect of the increase in the Monetary Policy Rate (MPR) to 13 per cent by the Monetary Policy Committee (MPC) of the CBN in its May 2022 meeting.

“The share of consumer credit in total private sector credit shrank by 2.1 percentage points to 7.2 per cent, from 9.4 per cent in the preceding quarter,” the report disclosed.

According to the report, total credit by the CBN intervention in critical sectors of the economy