Thursday, February 08,
2018 08:55 AM / FBNQuest Research
outlook for Nigeria’s economy is now relatively stable as some uptick in growth
is expected on the back of an increased fiscal stimulus, and a pick-up in both
oil prices and production as well as selective private sector investments. So
far the deposit money banks (DMBs) have maintained a cautious approach towards
lending to the private sector so as to avoid a surge in non-performing loans.
NBS has recently released a report for Q4 2017, entitled Selected banking
sector data, drawn from the CBN. This report shows that banking sector
credit to the private sector totaled N15.7trn in Q4 2017, compared with
N15.8trn recorded in the previous quarter.
The oil and gas sector was the largest
recipient of loans from DMBs, accounting for 23% of total credit to the private
sector. We understand that some banks are seeing demand for loans for
additional working capital requirements to boost oil production.
The second largest recipient of loans was
the manufacturing sector, which accounted for 14% of the total in the same
period, unchanged from the previous quarter.
Meanwhile, the agriculture sector, which is
at the forefront of the economic diversification initiative of the government,
received just 3.4%. The sector will continue to struggle until agriculturists
can gain better access to credit. However, we note the multiple interventions
by the CBN.
Credit extension growth to the private
sector by banks was almost non-existent last year because fixed income
instruments were more attractive. However, given that yields have fallen by
+/-300bps in the past six months, we see a gradual pick-up in lending to the
private sector through this year.