Nigeria’s power and energy, mining and quarrying and education sectors seem to be the least attractive to the country’s commercial banks as they got the smallest portion of loans in the 3rd quarter of 2018, a report by the National Bureau of Statistics (NBS) has shown.
The figures released by NBS over the weekend, show that power and energy received credit of N422.7 billion, while mining and quarrying and education sectors got credits of N6.2 billion and N6.5 billion, respectively, in the quarter under review.
Rafiq Raji, the chief economist at Macroafricaintel Investment said that “these sectors are not good credit for banks at the moment,” noting that there is regulatory uncertainty with the mining sector.
For power, he said the lingering challenges facing the Distribution companies are discouraging banks from lending to them.
The Distribution Companies, created following the unbundling of the former Power Holding Company of Nigeria, are currently facing financing impediments, which has reduced their capacity to distribute power to their customers across the country.
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The low credit extended to education and mining and quarrying sectors in the third quarter fell short of the volume of credit they received in the previous quarter, according to the figures.
These were N10.17 billion, for the mining and quarrying sector in the second quarter, while education received N71.8 billion in the same period. “I think there is simply not enough scale and depth in private education to make it worth the trouble,” Raji said.
Oil and gas and manufacturing sectors got credit allocation of N3.59trillion and N2.15trillion to record the highest credit allocation in the period under review.
Credit to the private sector by Nigerian banks increased marginally (quarter-on-quarter) by two percent from N15.3 trillion in Q2 to N15.6 trillion in Q3 2018.
Earlier this year, Renaissance Capital (RenCap), an emerging and frontier market-focused investment bank, said Nigerian banking sector was on the recovery path with improving asset quality outlook.
“We think the banking sector Non-Performing Loans (NPL) are close to their peak; we also believe capital buffers will rise as profits improve and banks are increasingly more comfortable using an exchange rate of N330/$ (which is an average of the official rate and Investors and Exporters window rate) to value their foreign currency portfolios,” RenCap stated.
On a year-on-year basis the amount of credit to the private sector represents a 1.3 percent decline from N15.8 trillion in Q3 of last year to N15.5 trillion in the review quarter.
The total credit figure reported for Q3 2018 was not up to the N16.2 trillion recorded in Q3 2016, the highest credit Nigerian banks have given to the private sector since BusinessDay started collating the data in Q1 2015.
Meanwhile, the gross loans of the banks in the review period stood at N15.8 trillion and the sector’s Non-performing Loan (NPL) increased by 16 percent from N1.93 trillion in Q2 2018 to N2.24 trillion in Q3.
The ratio of banks’ NPLs to total loans stood at 14.16 percent in the review quarter compared to 12.45 percent reported in the previous quarter.
BusinessDay analysis of the report shows that share as a percentage of total credit was 0.39 percent for education, 0.04 percent for mining and quarrying and 2.7 percent for power.
This is compared to manufacturing sector, which received 13.79 percent of the banks’ credit to private sector; for oil and gas, agriculture and trade, the ratios were 23.08 percent, 3.8 percent and 6.89 percent respectively.
Endurance Okafor
