Aishah Ahmad, the Deputy Governor of the Financial System Stability Directorate at the CBN, emphasized the importance of maintaining lending to key sectors of the economy despite the tightening of monetary policy to control inflation in her recent statement during the Monetary Policy Committee meeting as disclosed by the CBN.
Ahmad said, “Given the positive correlation of market lending rates to the MPR, borrowing costs have risen, while growth in credit has slowed.
“Industry credit increased by N4.54tn between end-April 2022 and 2023 with significant portions of the credit granted to output elastic sectors (manufacturing, general commerce, agriculture, information and communication), and has been in an upward trajectory since 2019, yet the monthly trend in credit growth declined from 1.31per cent in March 2023 to 0.05 per cent in April 2023.
“Lending rates also remain high in response to the contractionary monetary policy stance. These developments point to the importance of balanced actions in the pursuit of the price stability mandate.”
During the recent Monetary Policy Committee (MPC) meeting, the Central Bank of Nigeria (CBN) decided to raise the Monetary Policy Rate (MPR) from 18.0 per cent to 18.5 per cent. According to Aishah Ahmad, the Deputy Governor of the CBN, the intervention loans provided by the CBN to specific industries and Small and Medium Enterprises (SMEs) are currently offered at single-digit interest rates. This initiative aims to ensure access to affordable financing for sectors that generate employment opportunities.
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Ahmad highlighted that this development should positively impact the overall economy by stimulating further growth in output and enabling businesses to maintain healthy cash flows. Additionally, it is expected to reduce the risk of loan defaults and uphold financial stability.
Furthermore, the soundness indicators in the banking industry remained robust as of April 2023. The capital adequacy ratio stood at 12.8 per cent, the non-performing loans ratio declined from 5.3 per cent in April 2022 to 4.4 per cent, and the liquidity ratio was 45.3 per cent, surpassing the minimum requirement of 30.0 per cent. Ahmad also noted that credit extended to the real sector and continued to expand.
