The Nigerian banking sector has been encouraged by the apex bank to continue injecting funds into the real sector of the economy in a bid to stimulate growth and ensure recovery from the recession witnessed during the covid-19 lockdown in 2020.
Specifically, the monetary policy committee of the Central Bank during the 284th MPC meeting held in March 2022 noted the impact that increased bank credit has had on the economy, with Nigeria’s economy recording a 3.4% real growth in 2021, a significant uptick compared to the 1.92% contraction recorded in the previous year.
Hence, the committee continued with a dovish monetary approach in keeping the interest rate low to further ensure economic growth. Meanwhile, despite the increased credit, loans-to-deposit ratio of deposit money banks dropped to 58.81% in March 2022 as against the 59.12% recorded as of December 2021.
This suggests how liquid the Nigerian economy has been in recent times with customer deposits also surging beyond bank credit. Notably, the CBN highlighted that liquidity ratio remained above its prudential limit at 43.5% in February 2022, with the Capital Adequacy Ratio (CAR) moderating slightly to 14.4% in the same month.
Also, the non-performing loans (NPL) ratio of Nigerian banks has been on a downtrend despite increased credit. Specifically, NPL ratio dropped slightly to 4.84% in February 2022 from 4.9% recorded in December 2021, according to the apex bank.