External reserves fall by $3.4bn in Q3’18
By Babajide Komolafe
BANKS will tighten lending criteria in the fourth quarter (Q4’18) following increased lending activities in the third quarter (Q3’18) driven by pursuit of market share objectives and improved economic conditions.
The Central Bank of Nigeria, CBN, disclosed this in its Credit Conditions survey for the Q3’18 released on Friday.
Among other things the report revealed that banks will tighten credit scoring criteria for secured household loans, demand stronger loan covenants and increase collateral requirements for corporate loans in the Q4’18.
The report stated: “Lenders expect to tighten the credit scoring criteria in the next quarter, yet still expect an increase in the proportion of approved households’ loan applications in Q4 2018. Lenders required stronger loan covenants from all firm sized businesses in the current and next quarters. Fees/commissions on approved new loan applications fell for all firm sized businesses
“More collateral requirements were demanded from all firm sizes on approved new loan application in Q3’2018. Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.”
On banks’ expectation in terms of demand and supply of credit in Q4’18, the report stated: “The availability of secured credit to households increased in Q3’2018 and was expected to increase in the next quarter. Market share objectives was the major factor for the increase in secured credit.
“Lenders reported that the availability of unsecured credit to households decreased in Q3’2018, but it is expected to increase in Q4’2018. Most lenders adduced higher risk appetite for this increase. The overall availability of credit to the corporate sector increased in Q3’2018 and was expected to increase in the next quarter. Market share objectives was the major factor contributing to the increase.
“Demand for secured lending for house purchase decreased in Q3’2018, but more lenders expect demand for secured lending to increase in the next quarter. The proportion of loan applications approved decreased even though lenders maintained the same credit scoring criteria.
“Demand for total unsecured lending from households decreased in the current quarter, but was expected to increase in the next quarter. Despite lenders’ resolve to tighten the credit scoring criteria, the proportion of approved unsecured loan applications increased in the current quarter, and was expected to increase in the next quarter.
“Lenders reported increased demand for corporate credit from all firm sizes in Q3’2018. They also expect increased demand from all firm sizes in the next quarter. The most significant factors that influenced demand for lending in the review quarter were the increase in inventory finance and capital investment, and they were expected to remain the main drivers in the next quarter”