The NBS has recently released a report for Q1 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 N15.6trn in Q1 2018, compared with N15.7trn the previous quarter. Although Nigeria’s economy has posted GDP growth over the past four quarters, DMBs have maintained a cautious approach towards lending to the private sector to keep a lid on non-performing loans. Furthermore, risk-free government securities remained relatively attractive during the quarter under review, despite a decline in yields.
- The oil and gas sector was the largest recipient of loans from DMBs, accounting for 21.8% of total credit. There has been no volume increase in lending to the sector. However, 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 13.3% of the total in the same period, compared with 14% recorded the previous quarter. The FGN’s strategy of economic diversification to propel growth requires a budding manufacturing sector. Structural issues such as power shortages continue to stifle manufacturing growth and help to explain why companies seek credit lines.
- Agriculture received just 3.2%. 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.
- Banks do not have the luxury of fx gains and 20%+ treasury bill yields anymore to boost their earnings in 2018. Therefore, the need to extend credit is likely to grow in the near to medium term, ultimately supporting GDP growth.