Oil, manufacturing sectors got most bank loans in nine months

Nigeria’s banking sector witnessed a 70.3 percent increase in lending activities to private sectors in one year as oil & gas as well as manufacturing sectors topped the list, analysis by BusinessDay shows.

The latest data from the Central Bank of Nigeria (CBN) indicates that credit to the private sector (CPS) rose to N463.74 trillion in the nine months of the year from N272.2 trillion recorded in the same period of 2023.

This data provides a detailed look into how the banking sector distributes loans across different economic sectors.

Despite these increases, Nigeria still maintains a relatively low credit to Gross Domestic Product (GDP) ratio of 33.3 percent as of August 2024, much lower than South Africa’s 92.4 percent.

The growth in domestic credit, especially credit to the private sector, is attributable to banks’ FX revaluation gains, the loan-to-deposit ratio and other policies introduced by the CBN to spur growth in the real sector of the economy, according to analysts.

The CPS includes loans, trade credits, other account receivables, and banks’ support to the private sector within a period.

Oil & Gas

Leading the chart, the Oil & Gas sector received the highest bank credit at N111.5 trillion, up from N52.5 trillion, marking a 112.3 percent increase. As a cornerstone of Nigeria’s economy, this sector includes activities related to the exploration and production of oil and natural gas, contributing to the nation’s revenue and foreign exchange.

Manufacturing

The Manufacturing sector, which drives industrialisation and economic diversification, received N85.8 trillion, up 51 percent from N56.8 trillion. The sector contributed 8.21 percent to Nigeria’s GDP in Q3, showing slight growth during the quarter.

Finance, Insurance, and Capital Market

This sector, which includes banks, insurance companies, and investment firms, received N53.9 trillion in bank credit, up 103 percent from N26.5 trillion. It’s vital for maintaining financial stability and fostering economic growth, with its contribution to the GDP increasing to 5.51 percent, reflecting a year-on-year growth of 30.83 percent.

General

The General sector, which encompasses various unspecified activities, saw an increase in bank credit to N48.8 trillion from 27.2 trillion, a 79.4 percent rise. This indicates a diverse range of lending across multiple sub-sectors.

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Oil & Gas Services

The downstream sector of Oil & Gas Services received N43.5 trillion, a substantial 111.2 percent increase from N20.6 trillion. This sector includes activities related to refining and distributing oil and gas products to consumers.

Trade/General Commerce

Trade and General Commerce received N36.04 trillion, reflecting a 38.6 percent increase from N24.8 trillion. This sector, which involves wholesale and retail trade, is crucial for distributing goods and services throughout Nigeria.

Government

Bank credit to the Government sector slightly increased by 15 percent, totalling N25.3 trillion in nine months, up from N22 trillion in the same period in 2023. This funding supports various governmental activities, including public administration and infrastructure projects.

Agriculture

A critical sector for Nigeria’s food security and rural development, Agriculture secured N22.3 trillion in bank credit, up from N16.6 trillion. The sector, which includes farming, livestock, and fisheries, contributed 28.65 percent to the GDP in Q3.

Construction

The Construction sector saw its bank credit rise to N20.2 trillion from N11.7 trillion. a 72.6 percent increase. This sector is essential for building infrastructure such as roads and buildings, which are key to urbanization and economic growth.

Despite this, the sector contributed 3.35 percent to total real GDP in the third quarter of 2024, lower than its contribution of 3.36 percent in the same quarter of the previous year, and higher than in the immediate past quarter where it contributed 3.17 percent.

Information & Communication

The Information & Communication sector received N16.5 trillion, up from N13.5 trillion, marking a 22 percent increase. This sector, encompassing telecommunications, IT services, and broadcasting, is pivotal for digital connectivity and technological progress in Nigeria.

The sector contributed 16.35 percent to total GDP growth in the third quarter of 2024, in real terms.

This is higher than the 15.97 percent contributed in the same quarter of the previous year and lower than the 19.78 percent it contributed in the second quarter of 2024.