Caution in credit extension

The NBS recently released a report for Q3 2018 in its Selected Banking Sector Data series, drawn from the CBN. This report shows that loans extended by deposit money banks (DMBs) totalled N15.6trn in Q3 2018, compared with N15.3trn the previous quarter. There is still a scarcity of affordable credit. DMBs continue to maintain a cautious approach towards lending to the private sector, to avoid growing non-performing loans. According to the NBS, non-performing loans as at Q3 2018 stood at N2.2trn.


  • The oil and gas sector remained the largest recipient of loans from DMBs, accounting for 23.1% of total credit. There has been no significant new lending to this sector over the past few quarters so we attribute the slightly higher percentage share vs 22.5% to fx depreciation seen across banks’ financials.
  • The second largest recipient of loans was the manufacturing sector, which accounted for 13.8% of the total, compared with 13.2% recorded the previous quarter.
  • Manufacturers still struggle with business expansion, and access to finance is cited as one of their major challenges alongside power supply shortages. Large firms are preferred recipients of the limited loans from banks and as such, SMEs are unable to sustain business continuity.

Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research


  • Agriculture received just 3.8%. Industry sources suggest that over 70% of smallholder farmers do not access loan facilities from banks. Although the CBN offers multiple schemes targeted towards farmers and agriculturists, these are insufficient to meet the sector’s high demand for credit.
  • Looking ahead, we do not expect loan growth to pick up until H2 2019 primarily on the back of soft demand and the election cycle. Demand has not yet recovered to pre-recession levels, resulting in banks’ concerns around loan servicing.

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