NBS reports 6% Nigeria banking sector loan growth to N19.87trn in Q3’20

By Charles Abuede

• Report points that growth in loans from banks not expected until economic activities pick up significantly

A recently released select banking sector data series for the third quarter of 2020 by the National Bureau of Statistics (NBS) and drawn from the Central Bank of Nigeria (CBN), shows that loans extended by Nigerian deposit money banks (DMBs) totalled N19.87 trillion, indicating a marginal uptick in the growth of loan in the sector for the quarter.

The quarter-on-quarter increase of just six per cent or N260 million from N18.82 trillion in the previous quarter can be attributed to the more cautious approach adopted by the banks due to macroeconomic headwinds triggered by the on-going pandemic.

An analytical breakdown of the report shows that while most banks have restructured their loan books to accommodate moratoriums, tenor extensions and interest rate reductions for some oil and gas companies, the oil and gas sector accounted for 25.8 per cent of total credit (N3.74 trillion) in Q3 and this grew by 3.6 per cent quarter-on-quarter and 12.6 per cent year-on-year.

Also, the second largest beneficiary of loans in the period under review was the manufacturing sector, which accounted for 15.3 per cent or N3.03 trillion of the total loans. Though, according to the CBN, the sector has benefitted from increased credit extension by the banking industry; whereas as of November 2020, total loans granted to the manufacturing sector amounted to N738 billion.

On the other hand, loans extended to the agriculture sector grew by 3.2 per cent quarter-on-quarter and 39 per cent year-on-year, accounting for five per cent of the total in the third quarter of 2020.

Deposit money banks are naturally wary of a pick-up in non-performing loans (NPLs); and according to the NBS, NPLs stood at N1.17 trillion at end-Q3, compared with N1.21 trillion in Q2. Based on data from the NBS, sectors that had the highest NPLs in Q3 were oil and gas, construction and general commerce; they accounted for 20 per cent, 15 per cent and 13 per cent of total NPLs respectively.

From the data chain, the report noted that credit allocation by state places Lagos as the primary recipient by the close of the 9 months of 2020. This is, however, not surprising given that Lagos is the commercial hub of Nigeria and in the same vein accounted for 78 per cent of total credit allocated in Q3.

Meanwhile, Rivers and Abuja accounted for five per cent and three per cent of the total, respectively, in the same quarter. On the other hand, credit allocation to states like Yobe, Kebbi and Jigawa represented less than one per cent of total credit allocation in the period under review; due to the fact that the informal sector is dominant in these states, hence making it difficult for banks to offer structured loans.

The CBN, at its last monetary policy committee (MPC) meeting held in November, left its policy rate unchanged at 11.50 per cent, stating that the stance to hold rate is beneficial to allow current policy measures to permeate the economy and this measure includes stimulating lending by the banks, even though the mechanism for monetary policy transmission is weak.

Looking ahead, high loan growth from the commercial banks to the formal sector is not expected for now, at least until there is a visible pick-up in economic activity.