Banks still cautious with credit extension

The NBS recently released a report for Q2 2018, entitled Selected Banking Sector Data, drawn from the CBN. This report shows that loans extended by deposit money banks (DMBs) to the private sector totaled N15.3trn in Q2 2018, compared with N15.6trn the previous quarter. DMBs continue to maintain a cautious approach towards lending to the private sector, to avoid growing non-performing loans. Furthermore, despite the lower margins on NTBs, banks still prefer them because they are risk-free.


  • The oil and gas sector was the largest recipient of loans from DMBs, accounting for 22.5% of total credit. That said, lending to the sector has been muted even though fx depreciation has resulted in a slightly higher percentage share for the sector.


  • The second largest recipient of loans was the manufacturing sector, which accounted for 13.2% of the total in the same period, compared with 13.3% recorded the previous quarter.


  • Based on the national accounts, manufacturing growth slowed to 0.7% y/y in Q2 from 3.4% the previous quarter; consumer demand remains soft and was a primary reason for the sector’s underperformance.
Deposit money banks’ sectoral allocation of credit, Q2 2018 (% shares)

Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
  • Agriculture received just 3.4%. The CBN offers multiple interventions to support the sector and compensate for the poor supply from the DMBs but these are insufficient to meet its high demand for credit.


  • In H2 2018, we expect loan growth to pick-up to high single-digits as banks attempt to improve on H1. Upstream oil and gas, trade & commerce as well as manufacturing are likely to be beneficiaries.

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