Bank recapitalisation to create more loan access for businesses, says CIBN
The ongoing recapitalisation of banks will create opportunity for banks to extend more credits to the domestic economy, President, Chartered Institute of Bankers of Nigeria (CIBN), Dr. Ken Opara has said.
He spoke yesterday during the institute’s 2024 annual lecture held in Lagos.
Opara said the net domestic credit stood at N66.4 trillion as of December 2022, showcasing the substantial credit extended by financial institutions to the real sector of the economy.
This figure, he said experienced a significant surge to N96.1 trillion by December 2023, highlighting the tremendous potential for growth and development in the real sector.
Opara said recently announced upward review of the Minimum Capital Requirements of Nigeria by the apex bank would further empower banks to extend more credit to the economy’s productive sectors.
“Despite the significant relevance of the real sector, access to credit for such key sectors compared to other climes is relatively low.
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He disclosed that a survey report conducted in more than 40 economies and released by Statista in 2024, nearly US $141 trillion worth of credit had been lent to the real sector in advanced economies in the second quarter of 2022.
The figures were twice as high as the volume of credit to the same sector in emerging markets.
It is worth highlighting the notable improvements in liquidity within Nigeria’s real sector. According to data from the Central Bank of Nigeria (CBN), the Net Domestic Credit stood at 66.4 trillion Naira as of December 2022, showcasing the substantial credit extended by financial institutions to the real sector of the economy.
However, the volume of credit to the key sectors in Nigeria is showed that agricultural sector got N5.8 trillion representing about six per cent of the total credit; manufacturing sector – N19.7 trillion representing approximately 21 per cent of the total credit and services sector – N36 trillion representing 37.4 per cent of the total credit.
He advocated more credit to these key sectors and particularly the agriculture sector.
Also speaking, Professor of International Finance Law, University College, London, Graham Penn, said loan sales are an important part of balance sheet management for banks because they allow banks to use their capital and loan origination capabilities more efficiently, and enhance their ability to manage credit risk.
He said: “They allow banks to relieve the capital carrying costs of the relevant loans. Allow banks to crystalise their loss where the borrower has defaulted/run into financial difficulty,” he said.