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Nigeria’s private sector credit is gradually improving, according to the latest data released by the Central Bank.

Data from the
regulatory body says private sector credit growth rebounded marginally
in October, reaching 6.9 percent year-on-year, from 5.3 percent in
September and 4.5 percent in August.

In nominal terms,
credit to the private sector reached N10.5 trillion in October, from
N10.3 trillion in September, N10.1 trillion in August, and N10.2
trillion at the end of 2009.

Finance experts say
while it appears that private sector credit has only moved up 3.2
percent year to date, its month-on-month growth rate has been in
positive terrain for three consecutive months (for the first time since
December 2009), at 1.9 percent in October, from 2.2 percent in
September and 2 percent in August.

Samir Gadio,
emerging markets strategist, Standard Bank, said one of the reasons
behind the substantial decline in annual growth rates is the high base
effect in the data.

“Private sector
growth expanded 84.8 percent year-on-year in 2008, predominantly due to
margin lending-related activities. The combination of a high base
effect and the continued deleveraging in the financial system since
2009, as well as a sharp deceleration in lending associated with the
structural issues in the banking system and increased risk aversion,
could only result in a sustained fall in annual credit growth figures,
until the end of the first half of the year,” Mr. Gadio said.

Experts say some technical reforms will be needed to boost retail lending, despite the significant improvement.

Mr. Gadio says the
tightening in monetary conditions by the Central Bank, following the
Monetary Policy Committee held on September 21 has not helped the
private sector credit outlook, adding that Sanusi Lamido Sanusi, the
Central Bank governor, recently indicated that he did not expect an
improvement in lending in 2010, at least until the banks are
restructured.

Yes, more loans are available

Bashir Borodo,
president of the Manufacturers Association of Nigeria (MAN), confirmed
that access to loan in the sector has improved.

“Yes, I must say
that access to loans has improved. This is because there is more
liquidity in the system, partly because of the direct intervention of
the Central Bank in terms of its guaranteed loans. Right now, we are
very optimistic that this change would continue this year and in 2011,”
Mr. Borodo said.

A source at
Intercontinental Bank said the improvement could be traced to the
special funds deployed by the Central Bank to the private sector.

“We should remember
that the Central Bank gave money for loans for those sectors, and they
are guaranteed. The banks have no option than to put these funds up for
loans. Also, this is the year’s end, many companies have to produce
more to meet year end demands and this means they would have to make
more demands for loans and fortunately, there are more guaranteed funds
from the regulatory body,” he added.

“Risks are better
evaluated now. Because of what banks have faced, they have strengthened
their risk management departments with better and more hands. Also, the
cost of money is reducing. There are now more willing deposits, current
and savings account, and this encourages the banks to lend now,” the
source said.