The lending by the Nigerian banking industry to SMEs increased by 600% due to favorable business conditions, low interest rates and arrival of new technologies in the industry.

Professor Chukwuma Soludo, the CBN (Central Bank of Nigeria) Governor, said that the banks credit in Nigeria for SMEs (Small and Medium Scale Enterprises) has increased by 600% from N35 Billion (US$0.30 Billion) in 2003 to N204 Billion (US$1.73 Billion) in 2007, as reported by AllAfrica.

According to the CBN Governor, the growth in credit in the Nigerian banks showed that the consolidation of banks had a very positive influence on the core private and real sector. The Nigerian banks’ credit to the private sector has gone up from about N1,191.5 Billion (US$10.12 Billion) in 2003 to a 2004 high of N1,150.9 Billion (US$9.77 Billion), and then to N1,950.4 Billion (US$16.56 Billion) in 2005, N2,490.4 Billion (US$21.15 Billion) in 2006, and N4,941.5 Billion (US$41.97 Billion in 2007, recording year on year growth rates of 26.6%, 29.3%, 27.7% and 98.4 % correspondingly.

The primary reason for the growth of the Nigerian banking industry is attributed to the growing economy of the nation along with the development of infrastructure in the Nigerian banking sector. A number of attractive policies like low interest rates, together with easy availability of loans, are also responsible for incredible growth in the Nigerian banking industry.

Besides, the various innovative technologies in the banking industry, like mobile banking, payment through credit & debit cards as well as net banking, are also drawing increasing number of customers towards the banks. The increasing job opportunities and growing incomes are also contributing to the boom in the banking sector of Nigeria.

In addition, CBN increased its loan rates or Monetary Policy Rate (MPR) from 10% to 10.25% on June 3, 2008 to control the high inflation sparked off by mounting food prices all over the world. Inflation in Nigeria stood at 7.8% in April 2007 but shoot up to 8.2% in March 2008.

As per a Research Analysts at RNCOS, “The booming banking sector in Nigeria is gaining support from the strong national economy that is emphasizing that commercial banks are playing vital role in the economic growth of Nigeria. Moreover, the hike in the lending rate would help the industry to maintain the money flow as the country could see inflation going even higher in future.”

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