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On Wednesday, 26th of February 2020, Zenith Bank announced that it will slow its loan growth to 2 percent in 2020. This follows a year in which the financial institution had an aggressive extension of loans to businesses in Nigeria, in compliance with the new minimum loan-to-deposit ratio policy introduced by the central bank.

The lender experienced a 22 percent expansion in loans last year, from 2.02 trillion naira in 2018 to 2.46 trillion naira, it said. According to a statement by Ebenezer Onyeagwu, Zenith Bank’s new CEO, loan growth is “a reflection of what we see in the macro-environment” and the bank “can’t grow beyond the economy.” But it also indicated that loans could grow further if large funding opportunities emerged during the year.

There are other factors that may have contributed to the bank’s decision to cut back on lending such as the recent outbreak of the coronavirus and the forecast by the International Monetary Fund (IMF) of Nigeria’s economic growth. 

Another statement by the Bank’s chief executive indicates that due to the impact of the coronavirus in China, Nigeria’s major trading partner, a possible slowdown in demand for loans is bound to happen.

The Asian nation in recent years has become one of the world’s leading industrialists but the recent outbreak of the deadly coronavirus has become a major threat, not only to its economy but also to those of its business allies. The country, over the decades, has positioned itself to trade with almost every nation of the world. It imports raw materials in large tonnes from Africa and other developing countries, which are used to make sophisticated products that are sold the world over. This makes its economy interact with many others daily.

However, the epidemic has caused a meltdown in the Chinese economy and the immediate impact of the coronavirus is felt in many developing economies like Nigeria due to slowdowns in the importation of finished goods and the export of raw materials. This is also directly slowing down the rate at which money flows into the economy as importers are forced to consider costlier alternatives, resulting in an increase in the prices of products.

Moreover, consumers are becoming more conscious of their spending. Therefore, if buyers are reluctant to spend, business owners would have no immediate need for loans to expand their businesses.

After reviewing current events, the IMF last week reduced its growth forecast for Nigeria in 2020 to 2 percent from 2.5 percent. The Fund cited that there would be lower demand for crude oil due to fears that the coronavirus outbreak in China will cause a slowdown. 

Nigeria is Africa’s largest producer of crude oil, its main foreign earner, accounting for 95 percent of foreign exchange earnings and 80 percent of budgetary revenues. Going by the IMF’s forecast, there would be a slowdown in oil demand globally which would limit the flow of foreign currency in Nigeria, slow down businesses and therefore reduce the demand for business loans.

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