Survey Shows Rise in Unsecured Lending in Q1

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Nume Ekeghe

Demand for total unsecured lending from households increased in the first quarter of 2019 and was expected to increase this quarter as the availability of secured credit to households increase.

The Central Bank of Nigeria (CBN) disclosed this in its Credit Conditions Survey report released yesterday.

It stated that the availability of secured credit to households was expected to increase this quarter, based on the improving economic outlook.

Banks had reported that availability of unsecured credit to households increased in Q1 2019, but it was expected to contract in Q2 2019, as most lenders adduced higher appetite for risk for this increase.

The overall availability of credit to the corporate sector increased in Q1 2019 and was expected to increase this quarter.

The report also showed that demand for secured lending for house purchase decreased in Q1 2019, but more lenders expected demand for secured lending to increase this quarter. The proportion of loan applications approved increased even though lenders tightened the credit scoring criteria.

It states: “Demand for total unsecured lending from households increased in Q1 2019, and was expected to increase in the next quarter (Q2). Despite lenders’ resolve to leave the credit scoring criteria unchanged, the proportion of approved unsecured loan applications decreased in the current quarter but is expected to increase in the next quarter.”

“Lenders reported increased demand for corporate credit from all firm sizes in Q1 2019. They also expect increased demand from all firm sizes in the next quarter. Secured loan performance, as measured by default rates, improved in the review quarter, and lenders still expect lower default rates in the next quarter.”

According to the report, total unsecured loan performance to households, as measured by default rates, deteriorated in Q1 2019, but was expected to improve in this quarter.

It further added: “Corporate loan performance improved across all sizes of firm in the current quarter. Lenders generally expect lower default rates for all firm sizes in the next quarter. Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR remained unchanged in Q1 2019, and was expected to narrow in the next quarter.”