A rise in the value of foreign loans following a record devaluation of the naira in June led to a 50 percent jump in the loan books of eleven banks surveyed by BusinessDay.
The increase in loans has completely eluded small businesses who must brace for tougher times as banks have now exceeded their annual loan book target and are unlikely to offer fresh loans.
Households will also feel the pinch if banks do not issue fresh credit for the remainder of the year with consumer finance accounting for a good chunk of the loan books of the banks.
The banks are Ecobank Transnational Incorporated, Access Holdings Plc, Zenith Bank, United Bank for Africa (UBA), Fidelity Bank, Guaranty Trust Holding Company (GTCO), FBN Holdings Plc (FBNH), Stanbic IBTC Holdings, FCMB Group, Unity Bank, and Wema Bank.
“The increase in the Monetary Policy Rate (MPR) would have typically had a negative impact on loan growth. However, customers still needed loans in the first half of 2023, despite the increase in interest rates,” Tajudeen Ibrahim, director of research and strategy analyst at Chapel Hill Denham, said.
The MPR is the rate at which the apex bank lends to commercial banks and often determines the cost of funds in the economy.
The Central Bank of Nigeria started its monetary policy tightening cycle in May 2022, with its benchmark interest rate rising from 11.5 percent to 18.75 percent in July this year.
“The implications of borrowing at the current high-interest rate are not ideal, and it has a negative impact on the Nigerian economy. When interest rates are high, businesses pass on the high cost of borrowing to consumers, which contributes to inflation,” said Ibrahim.
There are increasing concerns that the regulator will continue to hike interest rates to subdue red-hot inflation that is waging war on Nigerians, exacerbated by the new reforms of President Bola Tinubu, who removed the subsidy on petrol and backed the floating of the naira.
“Banks have also made significant inroads into the retail lending market in recent years. Tier-1 banks have been particularly aggressive in deploying retail lending products, as evidenced by the increasing value of loans over time,” Ibrahim added.
Further findings by BusinessDay showed Ecobank Transnational Incorporated recorded the highest loans and advances to customers of N8 trillion in H1 2023, reflecting a 103.8 percent increase from the previous year.
Access Holdings saw an increase of 45.2 percent to N6.71 trillion, while that of FBNH increased to N5.26 trillion from N3.38 trillion.
Zenith Bank reported a 44 percent increase to N5.05 trillion; UBA, N4.5 trillion; Fidelity Bank, N2.65 trillion; GTCO, N2.32 trillion; and Stanbic IBTC Holdings, N1.66 trillion.
FCMB Group posted a 37.5 percent increase in loans and advances to customers, reaching N1.54 trillion in 2023; Wema Bank, N0.627 trillion; and Unity Bank, N0.199 trillion.