The availability of loans without collateral will fall in the first quarter of the year, the Central Bank of Nigeria, CBN has said.
The statistics department of the apex bank gave this indication in its Credit Conditions Survey Report for the fourth quarter of 2019.
Part of its report read, “The availability of secured credit to households increased in Q4 2019 and was expected to increase in the next quarter.
It stated, “Improving liquidity positions was the major factor for the increase in secured credit.
“Lenders reported that the availability of unsecured credit to households increased in Q4 2019, but it is expected to fall in Q1 2020.
“Most lenders adduced market share objectives for this increase.”
It also noted that the overall availability of credit to the corporate sector increased in Q4 2019 and was expected to increase in the next quarter.
Improved market share objective was reported to be the major factor contributing to the increase.
The report stated that the demand for secured lending for house purchase increased in Q4 2019 and that lenders expected the demand for secured lending to increase in the next quarter.
It also noted that the proportion of loan applications approved increased even though lenders maintained the credit scoring criteria.
It was reported that the demand for total unsecured lending from households increased in the current quarter, and was expected to increase in the next quarter.
In spite of lenders’ resolve to retain the credit scoring criterion, the proportion of approved unsecured loan applications was said to have increased in the current quarter and was expected to further increase in the next quarter.
According to the report, lenders reported increased demand for corporate credit from all firm sizes in Q4 2019.
They also expected increased demand from all firm sizes in the next quarter.
Secured loan performance, as measured by default rates, improved in the review quarter, and lenders were said to still expect lower default rates in the next quarter.
Total unsecured loan performance to households, as measured by default rates, improved in Q4 2019 and was expected to further improve in the next quarter.
Corporate loan performance improved across all sizes of firm in the current quarter.
Lenders expect lower default rates for all firm sizes in the next quarter.
Lenders reported that the overall spread on secured lending rates on approved new loans to households relative to Monetary Policy Rate narrowed in Q4 2019 but was expected to remain unchanged in the next quarter.
The overall spreads on unsecured lending widened in Q4 2019 and were expected to widen further in the next quarter.
Changes in spreads between bank lending rates and the MPR on approved new loan applications narrowed for all firm sizes in the current quarter and were expected to narrow further for all business sizes in this quarter.
The report showed that credit conditions in the corporate sector varied by the size of the business.
The survey asked lenders to report developments in the corporate sector by large and medium-size.
This was driven by market share objectives, changing sector-specific risks, favourable economic conditions, changing appetite for risk and improved liquidity conditions.
Lenders reported that the prevailing commercial property prices negatively influenced credit availability of the commercial real estate sector in the current quarter.
However, the prevailing commercial property prices positively influenced secured lending in the current quarter.