Nigeria banks’ lending drops

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Nigeria’s private sector has suffered insufficient funding following a decline in total loans granted by Nigerian banks to the sector.

Lending declined by N600.60bn, from N16 trillion in the first quarter of 2017 to N15.34 trillion, in the second quarter of 2018.

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A report by the National Bureau of Statistics (NBS) on Selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength (Q2 2018), recently released, revealed that credit to the private sector declined for six consecutive quarters.

A breakdown of the total N63.27 trillion credit provided in 2017 by banks to finance activities of the private sector shows that N16 trillion was provided in the first quarter.

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The second, third and fourth quarters had N15.7 trillion, N15.83 trillion and N15.74 trillion, respectively.

According to the report, banks lent N15.6 trillion to the private sector in Q1 2018, while the total value of credit allocated by banks stood at N15.34 trillion as at Q2 2018.

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Credit allocation to the Oil & Gas sector increased to N3.45 trillion in Q2 from
N3.42 trillion in Q1 2018, while finance to the Manufacturing sector dropped to N2.02 trillion from N2.07 trillion in Q1.

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The money lent to the agriculture sector increased to N523.08 billion from N501.6 billion recorded in Q1, Power and Energy dropped to N416.34 billion from N426.5 billion while Mining and quarry also declined to N10.18 billion from N10. 461 billion in Q1.

While credit to Government increased to N1.47 trillion from N1.411 trillion, Trade/General Commerce decreased from N1.054 trillion to N1.044 trillion, Finance, Insurance and Capital Market also dropped to N991.22 billion from N999.491 billion.

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Similarly, Real Estate declined to N744.56 billion from N784.228; Information Communication and Technology received N814.57 billion and Construction had N612.85 billion, as at the review period.

The Education sector received N71.8 billion, while Transportation and Storage and other Sectors received N304.4 billion and N361.7 billion, respectively.

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Dr Frank Jacobs, President, Manufacturers Association of Nigeria (MAN), said the Deposit Money Banks (DMB) had consistently showed unease to lend to the real sector of the economy.

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“One of the greatest challenges facing the manufacturing sector in the country is lack of long-term financing and high interest rate.

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“It is quite disturbing to us that the banks are not lending as much as we need because that is the only way to grow the economy,” he said.

Jacobs said the association would continue to engage the banks to bridge the funding gaps.

He commended the Central Bank of Nigeria (CBN) for its plan to implement a special regime to make funds available to the manufacturing and agriculture sectors at nine per cent interest.

However, Jacobs reiterated that to spur economic growth, recovery and industrialisation, funds should be made available to the real sector at five per cent.

Similarly, Mr Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry (LCCI), said more funds should be allocated to the private sector to enhance productivity, employment and economic growth.

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“If lending is declining, it shows that there is a lot of more work to be done. Some of the issues affecting private sector lending needs to be revisited.

“When the economic environment is not too conducive, the risk of lending to the private sector increases,” he said.

Yusuf said fiscal and monetary policies should be created and implemented effectively to reduce the risk of lending to the private sector and to fix the operating environment.

Also, Mr Tunde Balogun, Co-Founder, Rent Small Small Ltd, a real estate company, said little attention had been paid to the real estate sector in terms of investment and funds compared to manufacturing, agriculture and oil and gas sector.

He said there was a need to increase and review the distribution of funds to other sectors of the economy towards driving sustainable and inclusive economic growth.

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