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Published On: Thu, Feb 8th, 2018

Nigerian banks to increase credit to private sector in 2018, says FBNQuest

FELIX OLOYEDE

Commercial banks in Nigeria would increase lending to the private sector this year, on the back of fallen yields in the securities market, which has dipped by +/-300bps in the past six months, FBNQuest has posited.

Banks extended minimal credits to the real sector last year, because of the attractiveness of fixed income instruments and the prevalent high non-performing loans (NPLs) in the banking industry, which rose  to over 13 per cent smashing the 5 per cent threshold set by the Central Bank.

The merchant banking and asset management arm of FBN Holdings stated, “The 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.”

It further explained that 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.

The NBS recently released selected banking sector data a report for Q4 2017 showed that banking sector credit to the private sector totaled N15.7trillion 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,” the FBNQuest report noted.

 

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