Survey Shows Improved Credit to Corporates in Q2


James Emejo in Abuja
The overall availability of credit to the corporate sector increased in the second quarter (Q2) of 2020 and was expected to increase in the third quarter (Q3) 2020, a survey has shown.

The Central Bank of Nigeria (CBN) stated this in its ‘Credit Conditions Survey Report for Q2 2020,’ that was posted on its website yesterday.

It showed that the proportion of loan applications approved in the Q2 2020 decreased, as lenders tightened their credit scoring criteria.

However, the survey anticipated that lenders would further tighten the credit scoring criteria but preempted the proportion of approved households’ loan applications in Q3 2020 to increase.

According to the survey, maximum Loan to Value (LTV) ratios decreased in Q2 2020 and was expected to remain unchanged this quarter. It stated that lenders were not willing to lend at low LTV ratios (75% or less) in both Q2 and Q3 2020.

However, they were willing to lend at high LTV (more than 75%) in Q2 and Q3 2020. The average credit quality on new secured lending improved in Q2 2020 and was expected to improve further in Q3 2020.

“Lenders reported that the overall spreads on secured lending rates to households relative to MPR narrowed in Q2 2020 and were expected to contract further in Q3 2020. Similarly, spreads for all lending types narrowed in the Q2 2020 and were expected to also narrow in the Q3 2020.

“Household demand for house purchase loans decreased in Q2 2020 but it is expected to increase in Q3 2020. For Q2 2020, households demand for all lending types increased, but in Q3 2020, only prime and other lending to households were expected to increase while buy to let lending would decrease,” it added.

It further showed that the availability of unsecured credit provided to households increased in Q2 2020 and was expected to increase further in Q3, 2020, adding that increased availability of funds and improving economic outlook were contributory factors for the increase.

“As lenders’ resolve to tighten the credit scoring criterion for total unsecured loan applications in Q2 2020, the proportion of approved total loan applications for households decreased. Lenders expect to loosen the credit scoring criteria in Q3 2020 and anticipate that the proportion of approved loan applications will increase,” it added.