Nigeria’ credit channel will witness a major boost with the introduction of the N100 billion ($142.86 million) Nigerian Consumer Credit Corporation (CREDICORP), according to Philip Ikeazor, a member of the Monetary Policy Committee (MPC).
In terms of monetary and financial system stability, he said it is expected that the scheme will enhance the efficacy of monetary policy and strengthen the interaction between the monetary and real sectors.
President Bola Tinubu in April 2024 gave the green light for the launch of the initial phase of the Consumer Credit Scheme.
Uzoma Nwagba, managing director/chief executive officer of the CREDICORP, disclosed in May 2024 that at least 1.6 million Nigerians have submitted applications, after the launch of the scheme.
Read also: Tinubu approves consumer credit scheme
The initiative aims to provide loan facilities to employed Nigerians, allowing them to meet their financial needs and repay over a period of time. Consumer credit schemes are vital components of modern economies worldwide, enhancing citizens’ quality of life by enabling access to goods and services upfront.
The scheme’s primary objective is to facilitate significant purchases such as housing, vehicles, education, and healthcare. Responsible repayment will enable individuals to establish credit histories, unlocking additional opportunities for improving their standard of living.
Moreover, according to the Presidency, the increased demand for goods and services will stimulate local industries and foster job creation.
Banks’ credit to the private sector declined by 4.67 percent year-to-date to N72.91 trillion in April 2024 from N76.48 trillion in January of the same year, data from the Central Bank of Nigeria (CBN) revealed.
The CBN has since its first Monetary Policy Committee (MPC) meeting in February 2024, raised the MPR by 750 basis points to 26.25 percent in May 2024 from 18.75 percent in July 2023.
“I appreciate the argument that further tightening may impact on the stability of the banking system through the deterioration of key financial stability indicators such as Non-Performing Loans (NPLs) and Capital Adequacy Ratio (CAR). I also understand the argument on the other adverse effects of a high interest rate regime such as crowding out effect, higher cost of funds, and an inverted yield curve or short-term bias,” said Aku Pauline Odinkemelu, a member of the MPC.
She said while these arguments are plausible, containing inflationary pressure is critically important to banking system stability and fostering a conducive investment climate. Given the moderation in the rate of change of price development (month-on-month), further but gradual tightening is important to consolidate and build on the gains already achieved from previous rate hikes
Lydia Shehu Jafiya, another member of the MPC said in her personal statement that financial soundness indicators remain within their regulatory requirements, indicating safety and soundness of the banking system.
“There is no gainsaying that domestic financial conditions are tight and may be putting upward pressure on public debt service, however, further tightening of monetary policy will help restore investor confidence and sustainable recovery of output growth,” she said.
In his personal statement at the last MPC meeting in May 2024, Muhammad Sani Abdullahi, member of the MPC said, data on the banking system shows that it remains safe, sound, and resilient. He said, “the major reforms announced recently on bank recapitalization will improve the robustness of the system and enhance the ability of Nigerian banks to continue to play their intermediation role and foster financial inclusion. This is in addition to innovations such as in digital banking, protection against cyber threats and keying into advancements in financial technology to enhance service delivery and overall stability.”