LATEST UPDATES
Card-image-cap

Business | Credit Services & Registry

CBN Poll: Availability of Secured Credit to Households Increased in Q4 2020

Dec 29, 2020   •   by   •   Source: Proshare   •   eye-icon 1614 views

Tuesday, December 29, 2020 / 06:43 PM / By CBN / Header ImageCredit: Corporate Finance Institute


Proshare Nigeria Pvt. Ltd.


Executive Summary

Supply of Credit: The availability of secured credit to households increased in Q4 2020and is expected to increase in the Q1 2021. Changing economic outlook andincreased market share objectives were major factors responsible for theincrease in supply of secured credit. Lenders reported that the availability ofunsecured credit to households increased in Q4 2020, it is expected to increasein Q1 2021. Most lenders cited improving economic outlook and increased marketshare objective as contributory factors for the increase. The overallavailability of credit to the corporate sector increased in Q4 2020 and isexpected to increase in Q1 2021, due to "Changing sector specific risk andmarket share objectives".

 

Demand for Credit: Request for secured lending for house purchase decreased in Q4 2020but lenders expect demand for such lending to increase in Q1 2021. Theproportion of secured loan applications approved decreased as lenders tightenedthe credit scoring criteria. Demand for total unsecured lending from householdsincreased in Q4 2020 and is expected to increase in the Q1 2021. Lenders' resolve to tighten the credit scoring criterion increased the proportion ofapproved unsecured loan applications in Q4 2020. Lenders reported decreaseddemand for corporate credit for all business sizes except for small businessesand OFCs in Q4 2020 but demand for all firm sizes is expected to increase in Q12021.

 

Defaults:Secured loan performance, measured by default rates, worsened in Q4 2020, whilelenders expect default rates in Q1 2021 to remain unchanged. The performance oftotal unsecured loan to households, measured by default rates, improved in Q42020 and is expected to improve further in Q1 2021. Corporate loan performancerates worsened for small businesses and medium PNFCs but improved for largePNFCs and OFCS in Q4 2020. Lenders expect lower default rates on lending to allsized businesses in Q1 2021.

 

Loan pricing: Lenders reported that the overall spread on secured lending rates onapproved new loans to households relative to MPR narrowed in Q4 2020 and areexpected to remain unchanged Q1 2021. The overall spread on unsecured lendingnarrowed in Q4 2020 and is similarly expected to narrow in Q1 2021. Changes inspreads between bank lending rates and MPR on approved new loan applicationswidened for all firm sizes except medium PNFCs in Q4 2020. It is expected toalso widen for all firm sizes except for medium PNFC in Q1 2021.

 

1.0           Introduction

Part of the mandate of the Central Bank of Nigeria(CBN) is to nurture an efficient monetary and financial system towardspromoting macroeconomic stability in Nigeria. To achieve this, the Bank needsto, among others, understand trends and developments in credit conditionsinformation which is collected through a quarterly survey of bank lenders. Thesurvey covers secured and unsecured lending to households, lending to PublicNon-Financial Corporations (PNFCs), small businesses and Other FinancialCorporations (OFCs).

 

This edition of the survey report presents trends anddevelopments in credit conditions in the fourth quarter and its expectation inthe first quarter of 2021. The survey was conducted in December 2020, the resultsare based on lenders' own responses and do not reflect the Bank's views oncredit conditions in the economy.

 

To determine the aggregate results, each lender isassigned a score based on their response. Lenders who report that creditconditions have changed" a lot" are assigned twice the score of those whoreport that conditions have changed "a little". These scores are then weightedby lenders' market shares. The results are analyzed by calculating netpercentage balances - the difference between the weighted balance of lendersreporting that demand was higher versus lenders reporting than demand waslower. The net percentage balances are scaled to lie between ±100.

 

The Q4 2020 credit condition survey for households,small businesses and corporate entities indicated increased availability ofsecured, unsecured and corporate entities. Spreads on overall secured lendingto households narrowed in Q4 2020 and are expected to further narrow in Q1 2021except for unsecured and all firm sized lending to household which is expectedto widen. Lenders reported that demand for total secured lending decreasedwhile unsecured lending from households increased in Q4 2020. However, theyexpected both lending to increase in Q1 2021. Demand for corporate lending decreasedfor all business sizes except for small businesses and OFCs in the reviewperiod.


2.0 Secured lending tohouseholds

Lenders reported an increase in the availability ofsecured credit to households in Q4 2020 relative to the previous quarter.Changing economic outlook and increased market share objectives were majorfactors responsible for the increase. Similarly, availability of secured creditis expected to increase in Q1 2021, changing economic outlook and increasedmarket share objectives as the likely contributory factors (Table 1, Item 6;Figs. 2.1 & 2.2).

 

The proportion of loan applications approved in Q42020 decreased, as lenders tightened their credit scoring criteria. Lendersexpect to further tighten the credit scoring criteria as they preempt theproportion of approved households' loan applications to increase in Q1 2021(Table 1, Items 3 & 4).

 

Maximum Loan to Value (LTV) ratios remain unchanged inQ4 2020 and is expected to remain same in Q1 2021 (Table 1, Item 5c). Lenderswere not willing to lend at low LTV ratios (75% or less) in Q4 2020 and Q12021. However, lenders were willing to lend at high LTV (more than 75%) in Q42020 and are willing to lend at high LTV (more than 75%) in Q1 2021 (Table 1,Item 10). The average credit quality on new secured lending improved in Q4 2020and is expected to improve in Q1 2021 (Table 1, Item 9).

 

Lenders reported that the overall spreads on securedlending rates to households relative to MPR narrowed in Q4 2020 and areexpected to remain same in Q1 2021. Similarly, spreads for all lending typesnarrowed in the Q4 2020 and are expected to narrow in Q1 2021 (Table 1, Item5a; Fig. 2.7).

 

Household demand for house purchase loans decreased inQ4 2020 but it is expected to increase in Q1 2021. For Q4 2020, householdsdemand for all lending types increased except for buy to let lending, however,all lending types to households are expected to increase in Q1 2021 (Table 1,Item 1a; Figs. 2.3 & 2.4). Household demand for consumer loans increased inQ4 2020 and is expected to increase in Q1 2021. Similarly, demand formortgage/remortgaging from households increased in Q4 2020 and is expected toalso increase in Q1 2021 (Table 1, Items 1b, 1c & 2).

 

Secured loan performance, measured by default rates,worsened in Q4 2020 and is expected to remain unchanged in Q1 2021. Banklenders reported low loss given default by households in Q4 2020, and they alsoexpect lower losses in Q1 2021 (Table 1, Items 7 & 8; Figs. 2.5 & 2.6).

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


Download Full PDF Report Here

 

Proshare Nigeria Pvt. Ltd.

 

Related News

  1. Why is it Essential to Have a Good Credit Score?
  2. Credit Bureau Association, MSME Africa To Host MSME Business Webinar
  3. CRC Credit Bureau Launches Data Submission API
  4. Credit Registry's Dud Cheque API Service To Boost Transparency In Banking Sector
  5. Credit Bureaus and Credit Scores
  6. COVID-19 Relief: Credit Registry Offers Free Credit Reporting to Lenders
  7. Lending Still Possible During COVID-19 Using CRC Credit Bureau's Automated Service
  8. Double Celebration for CRC Credit Bureau in Quarter one, 2020
  9. ESMA's 2020 Supervision Focuses on Outstanding Credit Ratings, Data Quality
  10. CRC Credit Bureau Launches Mobile App to Boost Access to Credit Information
  11. CRC Credit Bureau Named Best Credit Bureau Nigeria 2020 By CFI.co
  12. The Ease of Getting Credit Reforms in Nigeria
  13. CRC Credit Bureau Ltd 10th Anniversary Forum Examines Credit Penetration In Nigeria
  14. UK Financial Conduct Authority Launches Review Of The Credit Information Market
  15. Investing Under IFRS 9 Regime: Why Credit Ratings Matter For Asset Managers
  16. CBN Publishes Q1 2019 Credit Conditions Survey Report
  17. CBN, NJI Hold Workshop for Judges on Collateral Registry
  18. UK's Financial Conduct Authority: Registering As A Credit Rating Agency Post Brexit
  19. Dissecting the CBN's Real Sector Support Facility (RSSF) Guidelines
  20. Demand for Secured Lending for House Purchase Increased in Q2 2018

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Get the App

apple-store  play-store

Connect with us


Proshare is a professional practice focused on delivering research and information services to bridge the gap between investors and markets; by delivery on credible, reliable, and timely engagements through the following areas — Impact Research, Market Intelligence, Strategic Advisory, Stakeholder Relations & Digital Media.