In a report recently released by the CBN on the last Monetary Policy meeting, Emefiele said, “Again, the observed growth in credit illustrates the continued potency of the bank’s Loan to Deposit Ratio policy and the need to sustain credit flows to the private sector, especially at this critical time when the economy needs to indefatigably support its productive machinery.
“I note the continued moderation of NPL ratio from 11.0 per cent in April 2019 to 6.6 per cent in April 2020 amidst growing private sector credits.”
He said the reduction in the NPLs underlined the CBN’s continued drive to de-risk lending.
“I re-echo the imperatives of enhanced credit flows to strategic and high impact private sector ventures through an effective collaboration of all stakeholders, especially on the backdrop of the imminent economic downturn,” Emefiele added.
He said the drop in the NPLs was a sign of reasonable stability in the banking system.
He, however, stressed the need for banks to maintain prudential and regulatory measures to ensure that NPLs stayed below the prudential benchmark of 5.0 per cent.
A member of the Monetary Policy Committee of the CBN, Dr Kingsley Obiora, disclosed total credit to the economy rose to N18.6tn at the end of April 2020.
He said, “Financial system indicators were encouraging, with improvements to real sector lending, reflecting the bank’s Loan-to-Deposit Ratio policy.
“Total gross credit increased by N3.041tn from N15.57tn at end-May 2019 to N18.6tn at end-April 2020. The credit growth was largely driven by manufacturing, consumer credit, general commerce, information and communication, and agriculture.”
According to Obiora, the increase in credit is expected to bolster aggregate demand, investment, and job creation.
He said the average retail lending rates of deposit money banks and interest rate spreads moderated in the review period.
“This development, I believe, will have a positive impact on financial intermediation and the effectiveness of monetary policy transmission channels,” he added.
Obiora, however, noted that there were risks and vulnerabilities in the short to medium term, which included persisting new cases of coronavirus disease and low oil prices.
He said although downside risks abound, his overall outlook for the economy was more optimistic than most analysts seemed to portray.