As Nigerians continue to pay exorbitant interest rates on their debts, the amount of personal loans they owe commercial banks decreased from N7.52 trillion in the first quarter of 2024 to N3.47 trillion in the second quarter of the same year.
The most recent CBN quarterly economic report for Q2 2024, which was acquired, states as much.
Personal loan balances decreased by 53.9% from N7.52 trillion in the first quarter to N3.47 trillion in the second, according to the data.
The N5.49 trillion that was added in the first quarter of 2024 stands in stark contrast to this.
Although the central bank report did not provide an explanation for the drop, the data suggests that Nigerians will probably repay the loans because they are still having to deal with increased interest rates as a result of the apex bank’s aggressive monetary policy. Consumer credit decline
In Q2 2024, the total amount of consumer credit outstanding decreased by 42.6% to N4.73 trillion, reflecting this.
Retail loans rose from N0.72 trillion to N1.26 trillion, indicating a trend towards smaller-scale credit facilities, while personal loans made up 73.35% of total consumer credit.
This further implies that small enterprises in the retail sector are compelled to take out more loans in order to survive the high cost of doing business in the nation, even as individuals are paying off their debts.
According to the CBN report, “Compared to the previous quarter, consumer credit outstanding decreased by 42.60% to N4.73 trillion in Q22024.” Although personal loans decreased from N7.52 trillion in Q12024 to N3.47 trillion, they still accounted for 73.35% of all consumer credit. However, retail loans increased from N0.72 trillion to N1.26 trillion during the previous period.
Things you should be aware of
In an effort to fight inflation and promote economic stability, the apex bank, led by Yemi Cardoso, raised the monetary policy rate (MPR) five times.
The rate was raised from 18.75% to 22.75% in the first rise, 24.75% in the second, 26.25% in the third, 26.75% in the fourth, and most recently, by 50 basis points to 27.25% in September 2024, by the Monetary Policy Committee (MPC).
The country’s ongoing inflation problems, such as high core and food inflation, have prompted these hikes, which have totaled 850 basis points since Cardoso took office.
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The global credit ratings firm Fitch Ratings predicted in its most recent report on Nigeria that the country’s high interest rates and inflation would cause Nigerian banks’ non-performing loans to rise in 2024.
It stated: “Fitch anticipates that strong inflation and interest rates would cause the banking sector’s regulatory non-performing loans (end-1Q24: 5.1%) to rise in 2024. Nevertheless, loan books represent just 35% of the assets of the banking sector as of the end of 2023.
In light of increased concerns about inflation and economic hardship, at least 71.4% of Nigerians are advocating for a drop in interest rates, according to the CBN’s September 2024 Inflation Expectations Survey.
1,750 enterprises and 1,665 families from 36 states and the Federal Capital Territory participated in the study, which revealed a strong demand for lower lending rates.
16.1% of respondents wanted rates to stay the same, while just 12.5% backed an increase.
Widespread worries about the cost of borrowing and how it may affect household and company expenses are reflected in the overwhelming majority’s support for a rate cut.
Yemi Cardoso, the governor of the CBN, recently admitted that the increase in interest rates to 27.25% is “painful” for borrowers, but he also said that the move is required to successfully control inflation and lessen the amount of surplus money in circulation.
The next MPC meeting of the CBN is scheduled for November 25–26, 2024. As long as there is substantial inflation, it is anticipated that the committee will keep raising the MPR.
