CBN Survey: Lenders Face High Loan Default Rates in Q4 2024.

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A recent survey by the Central Bank of Nigeria (CBN) has revealed that lenders experienced high loan default rates in the fourth quarter of 2024 (Q4’24). The “Credit Condition Survey Report for Q4’24” reported that lenders observed higher default rates across all lending types, including secured, unsecured, and corporate loans.

The report also noted that while credit availability for corporate lending increased in Q4’24, secured lending to households declined during the same period. Despite this, the demand for credit across all lending types increased in Q4’24, driven by factors such as consumer loans and credit card lending from households, as well as inventory finance for corporate lending.

According to the CBN, the key factors contributing to corporate credit demand in Q4’24 included commercial real estate balance sheet restructuring, inventory finance, and capital investment merger and acquisition. However, the demand for mortgages and remortgages from households decreased in Q4’24.

The survey’s findings highlight the challenges faced by lenders in managing credit risk while also underscoring the importance of credit availability for economic growth.

The CBN survey also revealed that lenders’ appetite for risk increased in Q4’24, with more lenders indicating a willingness to lend to households and businesses. However, this increased appetite for risk was accompanied by a rise in default rates, highlighting the need for lenders to strike a balance between credit availability and credit risk management.

The survey’s findings have implications for monetary policy and financial stability. The CBN may need to consider the impact of high loan default rates on the financial system and take steps to ensure that lenders are adequately capitalized and provisioned for potential losses.

In addition, the survey’s findings suggest that lenders may need to revisit their credit risk assessment and management practices to ensure that they are lending to creditworthy borrowers. This may involve the use of more advanced credit scoring models and risk assessment tools.

Overall, the CBN’s Credit Condition Survey Report for Q4’24 provides valuable insights into the state of credit markets in Nigeria and highlights the need for lenders to manage credit risk effectively in order to support sustainable economic growth.

The report’s findings are expected to inform policy decisions and guide lenders in their credit decisions, ultimately contributing to the stability and development of the Nigerian financial system.

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