Banks to increase credit to households in Q1 2021- Report

Supply of secured and unsecured credits to households will increase in Q1 2021; this is according to the Central Bank of Nigeria (CBN’s) Fourth quarter (Q4) 2020 Credit Conditions Survey Report.

The report indicates that the availability of secured and unsecured credits to households increased in Q4 2020 and is expected to rise further in the first quarter of 2021.

This edition of the survey report, which was conducted in December 2020, presents trends and developments in credit conditions in the fourth quarter, and its expectation in the first quarter of 2021.

The report noted that changing economic outlook and increased market share objectives were major factors responsible for the increase in the supply of secured credit. In addition to these factors, improving economic outlook contributed to the increased availability of unsecured credit in Q4 2020.

These factors, according to the report, are part of the forces expected to drive increased credit in Q1 2021.

Despite the increased availability of secured and unsecured credit in the fourth quarter of 2020, request for secured lending for house purchase decreased in Q4 2020. Lenders, however, expect demand for such lending to increase in Q1 2021.

While lending for the purchase of houses decreased, demand for mortgage/remortgaging from households increased in Q4 2020 and is expected to increase in Q1 2021.

The report notes that the proportion of secured loan applications approved decreased. This is understandable, considering that lenders tightened the credit scoring criteria, according to the report.

Further, the demand for total unsecured lending from households increased in Q4 2020 and is expected to increase in Q1 2021.

Lenders’ resolve to tighten the credit scoring criterion increased the proportion of approved unsecured loan applications in Q4 2020.

The overall availability of credit to the corporate sector increased in Q4 2020 and is expected to increase in Q1 2021, due to “Changing sector-specific risk and market share objectives”

Demand decreased for corporate credit for all business sizes except for small businesses and Other Financial Corporations (OFCs) in Q4 2020 but demand for all firm sizes is expected to increase in Q1 2021.

Secured loan performance, measured by default rates, worsened in Q4 2020, while lenders expect default rates in Q1 2021 to remain unchanged.

The performance of total unsecured loan to households, measured by default rates, improved in Q4 2020 and is expected to improve further in Q1 2021.