Loans From Banks To Private Sector, Government Dropped by N24trn In March, Says CBN

Loans from banks to the private sector and the government in reduced by N24tr in March 2024, fresh data from the Central Bank of Nigeria (CBN) has shown.

Loans to the private sector fell from N80.86tr in February to N71.21 trillion translating to roughly N9.65tr decline, the CBN’s money and credit data published by the apex bank has shown.

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Similarly, loans to the government declined to N19.59 trillion in March from N33.93 trillion in February representing a month-on-month decline of N14.34 trillion naira.

This brings the cumulative decline of loan to both sectors to N23.99tr for the period under review.

Credit to the private sector describes monetary resources given to the private sector, such as advances and loans, purchases of non-equity securities, trade credits, and other accounts receivable, which create a claim for repayment.

In January, credit to investors was N76.29 trillion while credit to the government stood at N36.18 trillion in January.

The decline in credit to the private sector and government can be attributed to CBN’s monetary tightening policy.

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Also, in line with its monetary tightening, CBN announced a downward review of the loan-to-deposit ratio (LDR) from 65 percent to 50 percent on April 17.

LDR is used to assess a bank’s liquidity by comparing its total loans to its total deposits.

An increase in the loan-to-deposit ratio allows banks to expand their credits to businesses and individuals, however, a decline in LDR reduces their ability to loan customers from depositors’ funds.