Drop in T-bills yields to spur growth in banks’ credit to private sector in 2018

Drop in yields on the Nigerian Treasury Bills (NTBs), a general improvement in the macroeconomic and business environment, and improved consumers’ confidence are expected to be main drivers of banking sector credit to the private sector in 2018, according to analysts at FSDH Research.

FSDH Research analysts say they expect the banking sector credit to the private sector to grow to N16.7 trillion in 2018, representing a growth of 6.34 percent from N15.7 trillion recorded in 2017.

Their projections are however against trend as provisional data from the National Bureau of Statistics (NBS) for Q4, 2017, indicate that the banking sector credit to the private sector dropped from N16.1trillion in Q4, 2016 to N15.7 trillion in Q4 2017.

They singled out the manufacturing sector, which they say should attract the highest credit, with a proviso that uncertainties surrounding the fuel subsidy in the petroleum marketing sector may lead to a contraction of credit to the sector.

According to the NBS figures, total credit as at the end of 2017 was higher than the figure of N13.1 trillion in Q4 2015, which could be traced to the impact of the devaluation of the local currency.

The sector with the highest credit allocation as at Q4 2017 was mining and quarrying, and petroleum marketing, which accounted for 28 percent of the total banking sector credit to the private sector.

Manufacturing at 14 percent followed with general services and trade coming behind at 18 percent and 7 percent respectively.

The analysts specifically note that agriculture, which contributed about 29 percent of the gross domestic product (GDP) in Nigeria as at end Q3 2017, only attracted 3 percent of the total credit.

“Our findings show that the agriculture sector in Nigeria is faced with many problems. Thus the sector is unable to attract the required credit. Some of the problems are inadequate storage facilities; poor transport network; inadequate research to develop improved seedlings; and weak integration between the sector and the manufacturing sector in providing manufacturing inputs,” they highlighted.