The Central Bank of Nigeria (CBN) disclosed that lenders, including commercial banks and other financial institutions, recorded higher default rates for secured, unsecured and corporate loans in the fourth quarter of last year (Q4 2024).
Credit default refers to when a lender is unable to collect a payment on an outstanding debt.
The apex bank revealed the default rate in its Credit Conditions Survey Report, Q4 2024, which was posted on its website.
Similarly, the proportion of loan approval increased for secured and corporate lending types, while the proportion of loan approval for unsecured lending decreased within the quarter under review.
Under the period, the overall spreads on secured and unsecured lending rates to households relative to Monetary Policy Rate (MPR) widened.
For corporate lending, all lending type spreads on loan relative to MPR also widened, except OFCs, which narrowed in the current quarter.
The report, which was authored by the apex bank’s Statistics Department, Economic Policy Directorate, further stated that lenders reported increased credit availability for unsecured and corporate lending, while secured lending to households declined during the period.
CBN said the decrease in secured credit availability was primarily due to a changing economic outlook, while market share objectives led to an increase in unsecured lending.
Secured lending refers to loans granted with collateral, including a car, home, or other assets, and are generally less risky for lenders, and come with lower interest rates.
The central bank stated that unsecured lending, which does not require collateral but depends on the ability of the lender to evaluate the borrower’s creditworthiness and cash flow, increased in the review period.
Unsecured credit consists of personal loans for home renovations, medical bills, and education costs, among others, but risks higher interest rates.
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