Nigerian banks’ credit to private sector hits N5trn in 12 months

BY GODWIN OBI

The Central Bank of Nigeria’s (CBN) commitment to boost private sector operators appears to be bearing fruits as commercial banks’ lending to the sector has grown by N5 trillion in one year.

According to data obtained from the CBN’s website, the banks’ credit to the sector in the period under review rose to N26.8 trillion in June 2022 from N21.9 trillion recorded in the corresponding period of 2021, thereby adding N5 trillion in loan growth in one year.

The Deposit Money Banks (DMBs) lent out a total of N26.8 trillion as of June 2022 up from the N24.378 trillion given out to support private sector business enterprises as of December 2021, representing a 10.15 per cent growth over 6 months.

The CBN has over the last 5 years pursued an aggressive policy of lending to the private sector, in the expectation that  it will help spur economic growth in the real sector, while also creating jobs.

Loans to the private sector were just N15.7 trillion as of December 2015 a which is an indication that around N11 trillion was added in under 7 years.

Further insight into the data reveals the Manufacturing sector for the first time led the pack as the segment with the largest proportion of loans at a total of N4.53 trillion, representing 16.9 per cent even as lending to the oil and gas downstream sector had for years taken a large chunk of private sector credit.

For instance, while lending to the manufacturing sector rose 23 per cent year on year (y/y) to N4.53 trillion, the downstream sector of oil and gas posted total sector credit of N4.2 trillion or 16 per cent with the general services sector coming third at 10 per cent of total sector credit.

However, the fastest growing sector was the Agriculture sector which rose by a whopping 41 per cent year on year to N1.6 trillion, as loans to the trade sector grew 39 per cent to N1.9 trillion.

Meanwhile loans to Nigeria’s embattled power transmission and distribution sector fell by 20 per cent.

It will be recalled that total credit to the Nigerian economy is at an all-time high of N57.2 trillion made up of N17.9 trillion to the government and N39.2 trillion to the private sector. The private sector lending of N39.2 trillion includes loans from banks, non-deposit money banks, and the central bank’s intervention loans.

Frontline Reporters had earlier reported that the CBN sold a sum of $1.50 billion in forex to various FX windows in the first three months (Q1 2022), representing a 7.7 per cent decline when compared to the fourth quarter of $1.62 billion sold in 2021.

Reacting to the development, analysts at Nairametrics said, that the economic growth that Nigeria is trying to create is not outpacing the inflation rate.

According to them, “Growth in the money supply is now seen as a major catalyst for driving the inflation rate. Most of the growth is in the form of loans to the public and private sectors of the economy respectively. As credit rises across the economy, the central bank will hope that it leads to faster economic growth by the time the Bureau of Statistics releases its second quarter GDP data”.

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