CBN: Corporate loan defaults worsened for small businesses in Q4

The Central Bank of Nigeria (CBN) says the rate of default on collateral loans worsened in the fourth quarter of 2020.

This is contained in a report released by the CBN statistics department titled ‘Credit Conditions Survey Report for Q4 2020’, released on Tuesday.

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

“The performance of total unsecured loan to households, measured by default rates, improved in Q4 2020 and is expected to improve further in Q1 2021.”

A secured loan is a loan in which the borrower tenders an asset such as vehicle, property and others as collateral for the loan, while an unsecured loan requires no collateral backing.

According to the report, corporate loan defaults worsened for small businesses and medium public non-financial corporations (PNFCs) but improved for large PNFCs and other financial corporations (OFCs) in Q4 2020.

It added that the situation will improve for all businesses in the next quarter.

CBN said the availability of secured and unsecured credit to households increased in Q4 2020 and is expected to rise in the next quarter.

It listed improving economic outlook and increased market share objective as factors responsible for the increase.

The apex bank noted that request for secured lending for house purchase decreased in Q4 2020, but is expected to increase in the next quarter.

It also said the proportion of secured loan applications approved decreased as lenders tightened the credit scoring criteria.