ASSESSING BANKING CREDIT SHOULD FOCUS ON PORTFOLIO ALLOCATIONS, NOT PERCENTAGE GROWTH – EXPERT
Dr. Wunmi Bewaji, a financial expert, emphasized that the impact of banking credit on the Nigerian economy should be assessed based on specific portfolio allocations and its societal influence, not merely focusing on the quantum or percentage increase. This insight came during an exclusive interview with our correspondent on Wednesday, in response to the recently released data by the Central Bank of Nigeria’s (CBN) Money and Credit Statistics.
The CBN’s Money and Credit Statistics revealed that the total credit to the Nigerian economy by the banking industry increased by 44.8% year on year to N96.2 trillion at the end of last year. This encompassed lending to both the government and the private sector, rising from N66.398 trillion in December 2022 to N92.188 trillion by the end of December last year.
Banking credit represents the total amount of funds individuals or businesses can borrow from a financial institution. Credit approval is determined by factors such as credit rating, income, collateral, assets, and existing debt.
According to the CBN, the data includes lending by the CBN and state-owned development banks, such as the Bank of Industry (BoI), as well as smaller credit extensions by other banks, including micro-finance banks and non-interest banks.
Examining the data, Wunmi highlighted that the 36.6% increase in credit to the government, totaling N33.6 trillion, raises questions about its allocation. He questioned how much is invested in infrastructure, how much goes to Bureau de Change, or is converted to dollars by unscrupulous public officers.
Ahead of the February 26 Monetary Policy Committee (MPC) meeting of the CBN, analysts expect the monetary policymakers to maintain an aggressive stance, as indicated by CBN Governor Dr. Olayemi Cardoso. The tightening position aims to curb inflation, projected to average 21% this year, with a focus on price stability for sustainable economic growth.
Wunmi emphasized that the consequence of banking credit lies in sectoral allocation to the real economy, rather than the volume or percentage rise or fall. He stressed that sectoral allocations are more crucial than the numerical fluctuations in banking credit for the overall economy.
Addressing the portfolio allocation, he questioned how much goes to the oil and gas sector, manufacturing, agriculture, and general commerce. The effectiveness of banking credit, he noted, depends on the appropriate allocation to various sectors, impacting employment, inflation rates, and the overall economic landscape.
The International Monetary Fund (IMF) has urged the CBN to adopt aggressive monetary policy to combat rising inflation and restore macroeconomic stability. The IMF emphasized the need for fiscal adjustments and development partner support in conjunction with aggressive monetary tightening.
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(From Tobi Adetunji; The News Source: Techeconomy)
