Unsecured credit

Availability of unsecured household credit declines in Q3 2020 – CBN – Nairametrics

The survey report on credit conditions for households, small businesses and corporations for the third quarter of 2020 released by the Central Bank of Nigeria, showed that there was an increase in the availability of credit for the entities. guarantees and corporations, while unsecured loans to households have declined. .

This was included in the Third Quarter Credit Conditions Investigation Report released by the Central Bank of Nigeria (CBN).

The main highlights of the investigation report are as follows:

  • There has been an increase in the availability of secured credit for households in the third quarter of 2020 compared to the second quarter of 2020, due to improving liquidity conditions for most lenders, as well as their willingness to increase their respective market shares and dominate the market.
  • According to the survey report, this trajectory is expected to be replicated in Q4 2020 – given that Q4 2020 marks the end of the fiscal year for most lenders as they strive to end the year with a size robust gross loan portfolio.
  • With the expected increase in the availability of loanable funds as well as the improvement in the economic outlook in Q4 2020, the availability of unsecured loans for households is expected to increase in Q4 2020, although it has declined in Q3 2020.

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  • The proportion of total household loan applications approved has declined due to lenders tightening their credit rating criteria for unsecured loan applications in the third quarter of 2020. With poor quality assets already on the books. Most lenders, lenders may have no choice but to further tighten existing credit rating criteria in Q4 2020.
  • Overall credit availability for the corporate sector is expected to increase further in Q4 2020 due to changing sector risks, changing economic conditions, changing appetite for business. risk, market share targets and changes in lender liquidity conditions.
  • Lenders have reported that while the spreads on credit card loans and approved unsecured personal loans / loans widened, the spread and overall unsecured loans narrowed in the third quarter of 2020. This This is quite understandable as unsecured loans come with so much risk and therefore lenders might charge at a premium rate to make more spreads. However, lenders expect the spread of approved credit card unsecured loans and global unsecured loans to widen further, while secured / personal loans overdrafts shrink in the fourth quarter.
  • Adequate collateral requirements were required from all business sizes on all new loan applications approved in Q3 2020 and there would be no significant changes as lenders would expect to require collateral requirements. even higher of all company sizes in Q4 2020.

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What you should know

The Central Bank of Nigeria, on a quarterly basis, conducts surveys of all lenders to understand trends and developments in credit conditions.

The report presents the results of the third quarter 2020 surveys conducted by the Statistics Department of the Central Bank of Nigeria and the trends and developments in credit conditions in the third quarter (Q3 2020) and expectations in the fourth quarter of 2020 (Q4).

The survey covers secured and unsecured loans to households, loans to public non-financial corporations (PNFCs), small businesses and other financial corporations (OFCs).


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