By Babajide Komolafe
LAGOS—The Central Bank of Nigeria, CBN, yesterday, said the spread between banks’ lending rates and the Monetary Policy Rate, MPR, widened in the first quarter of the year, indicating increase in lending rates during the quarter.
The CBN disclosed this in its Credit Conditions Survey report for first quarter of 2017.
The report, among other things, indicated that improved economic outlook prompted increased availability of credit, increased demand and decline in loan default. It also revealed that spread on lending rates widened during the quarter.
The report stated: “Changes in spreads between bank rates and MPR on approved new loan applications to the medium and large PNFCs and other financial corporations (OFCs) widen in Q1, 2017.
CBN Governor, Mr Godwin Emefiele
“Similarly, spreads on loans to all size businesses, were expected to widen further in the next quarter.
“Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR widened in Q1 2017, and was expected to remain widened in Q2, 2017.
“Lenders reported that spreads on credit card lending widened in Q1, 2017 and were expected to widen further in the next quarter.
“Similarly, spreads on overdrafts/personal loans widened in the current quarter and were expected to also widen in the next quarter.
“Lenders reported increased demand for corporate credit across all firm sizes in Q1, 2017 except from the OFCs. Lenders also expect increased demand across all firm sizes in the next quarter.
“Following the widen spreads between bank rates on all firms’ size businesses (except the small businesses) and MPR, the proportion of loan applications approved for medium and large businesses decreased in Q1, 2017.”
On loan default, the report stated: “Secured loan performance, as measured by default rates, improved in the review quarter. Similarly, lenders expect lower default rates in the next quarter.
“Total unsecured loan performance to households, as measured by default rates improved in Q1 2017 and was expected to improve further in the next quarter.
“Corporate loan performance improved across all firm sized business in the current quarter as default rates on lending to small, medium and large PNFCs were lower in the current quarter.
“The availability of secured credit to households increased in Q1, 2017 and was expected to increase in the next quarter. Changing economic outlook remained a major factor behind the increase.
“Lenders reported that the availability of unsecured credit to households increased in Q1, 2017 and it was expected to increase further in Q2, 2017. Lenders reported that changing economic outlook contributed to the increase in unsecured credit availability in Q1, 2017.
“The overall availability of credit to the corporate sector increased in Q1 2017 and was expected to further increase in the second quarter of 2017. The major factor contributing to increased credit availability is anticipation of a brighter economic outlook.
“Demand for secured lending for house purchase decreased in Q1, 2017 but was expected to increase in the next quarter. Due to lenders stance in tightening the credit scoring criteria in the current quarter, the proportion of loan applications approved in Q1, 2017 decreased.”
“Demand for total unsecured lending from households decreased in the current quarter, but was expected to increase in the next quarter. Due to lenders stance on tightening the credit scoring criteria, for granting total unsecured loan applications the proportion of approved.”
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By Babajide Komolafe