Household loans increased in second quarter –CBN

Secured loans to households increased in the second quarter of this year, the Central Bank of Nigeria (CBN) said in its ‘Credit Conditions Survey’ report posted on its website on Monday.

The document noted that the availability of secured credit to households climbed in Q2 2020 and is expected to rise further in Q3 2020.

“The changing appetite for risk was the major factor for the increase in supply of secured credit,” the report said.

It added that lenders reported that the availability of unsecured credit to households grew in Q2 2020, which was projected rise again in Q3 2020.

The general availability of credit to the corporate sector jumped in Q2 2020 and was anticipated to rise also in Q3 2020 owing to shifting sector specific risk.

The request for secured lending for house purchase, the report said, increased in Q2 2020 but lenders expected demand for such lending to fall in Q3 2020.

The share of secured loan applications approved dropped as lenders tightened the credit scoring criteria.

Demand for total unsecured lending from households grew in Q2 2020 and is projected to increase in Q3 2020.

Lenders’ decision to tighten the credit scoring criterion reduced the share of approved unsecured loan applications in Q2 2020.

The report noted that lenders reported higher demand for corporate credit from all firm sizes in Q2 2020 and expected demand to further increase in Q3 2020.

Secured loan performance as measured by default rates improved during the period even though lenders anticipated higher default rates in Q3 2020.

Similarly, the performance of total unsecured loan to households as measured by default rates improved in Q2 but was expected to worsen this quarter.

According to the report, lenders reported the general spread on secured lending rates on approved loans to households compared to Monetary Policy Rate tapered in Q2 2020 and was expected to shrink further in Q3 2020.