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CBN says default on loans with collateral gets worse in Q4

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The Central Bank of Nigeria (CBN) has claimed that the default on loans with collateral worsened in the fourth quarter of 2020.

Techeconomy.ng obtained this from a fourth-quarter ‘credit condition survey report’ released on Tuesday, December 29, by statistics department of the CBN.

The report read in part: “Secured loan performance, measured by default rates, worsened in Q4 2020, while lenders expect default rates in Q1 2021 to remain unchanged.”

The report maintained that the performance of total unsecured loan to households, measured by default rates, improved in Q4 2020 and was expected to improve further in Q1 2021.

It stated that the availability of secured credit to households increased in Q4 2020 and was expected to increase in Q1 2021.

According to the report, the changing economic outlook and increased market objectives were major factors responsible for the increase in supply of secured credit.

Lenders reported that the availability of unsecured credit to households increased in Q4 2020, and it was expected to increase in Q1 2021.

Most lenders cited improving economic outlook and increased market share objective as contributory factors for the increase.

The overall availability of credit to the corporate sector increased in Q4 2020 and was expected to increase in Q1 2021, due to ‘Changing sector-specific risk and market share objectives’.

Request for secured lending for house purchase decreased in Q4 2020 but lenders expected demand for such lending to increase in Q1 2021.

The proportion of secured loan applications approved decreased as lenders tightened the credit scoring criteria.

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Demand for total unsecured lending from households increased in Q4 2020 and was expected to increase in Q1 2021.

Lenders’ resolve to tighten the credit scoring criterion increased the proportion of approved unsecured loan applications in Q4 2020.

Lenders reported decreased demand for corporate credit for all business sizes except for small businesses and OFCs in Q4 2020 but demand for all firm sizes was expected to increase in Q1 2021.

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