Nigerian banks largely did not grow their loan books in the past year, a signal that the macroeconomic environment remains weak and non-supportive for growth.
The 12 largest lenders quoted on the floor of the Nigerian Stock Exchange (NSE) saw combined loans and advances dip by 6.37 percent to N13.18 trillion in December 2018, from N12.34 trillion a year earlier. This compares with a 25.14 percent increase between the 2013 and 2014 financial year.
“If you look at it critically, one of the strongest periods of loan growth was between 2011 and 2014 when many sectors were opened to lending. International Oil Companies (IOCs) were divesting from their offshore fields to shallow waters; also, we had the power sector privatisation,” said Omotola Abimbola, research analyst at Chapel Hill Denham Ltd.
“Infrastructure spending through private sector partnership will help de-risk the manufacturing industry and unlock opportunities in the economy,” said Abimbola.
A breakdown of the figure shows Guaranty Trust Bank (GTB), the largest lender by market capitalisation in Nigeria, saw loans and advances to customers fall by 12.27 percent to N1.26 trillion in December 2018 from a year earlier, compared with 21.10 percent increase between 2013 and 2014 financial year.
Access Bank’s loans and advances to customers were down 10.19 percent to N1.85 trillion in the period under review, compared with 38.69 percent increase in 2013-14.
Zenith Bank bucked the trend with loans and advances to customers up 8.57 percent to N2.10 trillion in the period under review.
First Bank Holdings’ loans and advances were down 7.89 percent to N2.54 trillion from a year earlier, compares with 21 percent increase in 2013-14.
Credit to the private sector grew by N1.23 trillion or 2.2 percent to N24.16 trillion, according to the Central Bank of Nigeria (CBN) Depository Corporation survey report for February 2019.
Johnson Chukwu, managing director and CEO, Cowry Asset Management Ltd, said the expansion in credit has been going to the public sector as yields remain attractive at between 13 and 14 percent.
“Economic recovery rate has been slow and financial institutions are cautious of rising Non Performing Loans (NPLs),” said Chukwu.
While GDP expanded by 1.9 percent in 2018, it is still below the long-term growth rate of the economy at 7.60 percent.
In the secondary net treasury bills market, average yields declined w/w by 11 basis points bps to close at 13.3 percent, as liquidity injections buoyed bullish sentiments.
Analysts at CSL Stock Brokers Ltd said the apex bank has on different occasions resorted to using incentives and in some cases coercion to increase lending to the real sectors of the economy, but these have failed to achieve the desired outcomes.
“Although we expect an improvement in loan growth over 2018, we maintain our view that banks’ loan growth in 2019 will remain muted given current high yields on government instruments,” said the analysts.
