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CBN calls on Banks to boost Private Sector Credit

By on May 24, 2012

Unhappy with the decline of credit being extended to the private sector by banks in the country, the CBN has called on the banks to increase lending to private sector in order to boost the economy.

Governor Sanusi read the riot act to banks directing them to channel their resources to the private sector where the funds could be used to induce growth in the near-term as opposed to the bank’s current practice of lending virtually exclusively to the public sector.

The statement read by Sanusi said, “Relative to the level at the end of December 2011, aggregate domestic credit (net) declined by 2.04 per cent in April, translating to a decline of 6.12 per cent on annualized basis.

“The decline in aggregate credit during the period was mainly due to the decline in credit to the core private sector. Credit to the core private sector declined by 0.22 per cent, while credit to government (net) declined by 55.03 per cent in the first quarter of 2012.”

It added, “Despite the decline in credit to the core private sector, overall credit to the private sector rose marginally by 0.66 per cent. This is indicative of a disturbing trend in lending to states and local governments at the expense of the core private sector.

“Following these developments, the committee reiterated its earlier advice that bank should put in place appropriate measures that would enhance the flow of credit to the private sector, in particular to those activities that have the potential of inducing growth in a relatively short period of time.”