Credit extension still slow-paced

The NBS recently released its report for Q4 2018 in its Selected Banking Sector Data series, drawn from the CBN. This report shows that loans extended by deposit money banks (DMBs) totaled N15.1trn in Q4 2018, compared with N15.6trn the previous quarter. There is still a risk-driven reluctance of financial institutions to lend to the private sector (especially to SMEs), and the lack of acceptable collateral by the banks’ definition has also contributed to difficulties in accessing finance.                                                                                

  • DMBs maintain a cautious approach towards lending to the private sector, to avoid growing non-performing loans (NPLs). According to the NBS, the total of NPLs as at Q4 2018 stood at N1.8trn.
  • Over the past twelve quarters the oil and gas sector has emerged as the largest recipient of loans from DMBs. In Q4 2018 the sector accounted for 23.5% of total credit. Lending to this sector has been subdued, which we attribute to the restructuring of existing loans to longer tenors.
  • The second largest recipient of loans was the manufacturing sector, which accounted for 14.7% of the total, compared with 13.8% the previous quarter. Access to credit remains a challenge for most manufacturers. However, we note that large manufacturing firms are preferred recipients of the limited loans available from banks.
Deposit money banks’ sectoral allocation of credit, Q4 2018 (% shares) 
Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research


  • Agriculture received just 4.0%, slightly higher by 20bps when compared with the previous quarter.  The CBN offers multiple financial interventions targeted at farmers and agriculturists. Although laudable, given the sector’s high demand for credit, these interventions have had limited impact.
  • We doubt that loan growth will pick up significantly, at least not until the new administration provides a clear policy direction. Furthermore, banks continue to tread cautiously regarding NPLs.

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