Banks gave N63tn loans to private sector in 2017 – NBS

The banking sector provided a total credit of N63.27tn to finance the activities of the private sector in 2017, figures from the National Bureau of Statistics (NBS) revealed.

The bureau stated this in its banking sector data report obtained on Friday by our correspondent in Abuja.

The amount represents an increase of N2.2tn over the N61.05tn recorded in the 2016 fiscal period.

A breakdown of the N63.27tn showed that the sum of N16tn was provided in the first quarter while the second, third and fourth quarters had N15.7tn, N15.82tn and N15.74tn, respectively.

The NBS in the report stated that the oil and gas sector got the highest amount of loans from banks during the period, receiving the sum of N14.2tn.

This, according to the report, represents 22.44 per cent of the total credit to the private sector.

The report stated that the manufacturing sector followed with N8.79tn. The credit to the manufacturing sector accounted for 6.7 per cent of the entire credit to the private sector.

On the other hand, the mining and quarrying sector got the lowest credit in the private sector, receiving the sum of N56.6bn.

The agricultural sector, according to the NBS report, received N2.07tn. The power and energy got N1.85tn; construction, N2.56tn; trade and general commerce, N3.89tn, while the credit to government was put at N3tn.

In the same vein, the real estate sector received a total loan of N3.13tn; finance, insurance; and capital market, N3.89tn; education, N310bn; information and communications, N3.2tn; transportation and storage, N1.55tn while other sectors got N1.47tn.

A former President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, called on the Central Bank of Nigeria (CBN) to reduce the Cash Reserves Ratio (CRR) and the Liquidity Ratio in order to free up more funds for banks to provide the much needed credit to the real sector.

The CRR is a certain percentage of the total bank deposits that has to be kept in the vault of the apex bank, and the banks do not have access to that amount for any economic activity.

The CRR is currently pegged at 22.5 per cent; liquidity ratio at 30 per cent; and the Asymmetric Window at +200 and -500 basis points around the Monetary Policy Rate, which is 14 per cent.

He said the call for a reduction was based on the conviction that the ability of banks to create money or extend credit to businesses had been stifled, having exceeded the 80 per cent loan-to-deposit regulatory threshold.

Ejinkeonye said even at the high prevailing interest rate, access to finance to the real sector had remained subdued due to attractive risk-free lending to government to fund its budget deficit.

He said, “We have noticed that the ability of banks to create money or extend credit to businesses is stifled, having exceeded the 80 per cent loan-to-deposit regulatory threshold.

“Even at the high prevailing interest rate, access to finance to the real sector will remain subdued owing to attractive risk-free lending to government to fund its budget deficit.

“In view of the above, we recommend a downward review of the Cash Reserve Ratio and the liquidity ratio to enable deposit money banks to create money and increase credit facility to the real sector. While this is sine qua non at this time, the apex bank must first raise its regulatory or oversight efficiency to forestall systemic risk that could be necessitated by high non-performing loan and poor capital adequacy ratio.”

According to him, inflationary pressure poses greater threat to businesses, adding that the current high inflation rate though decelerating is structurally induced.

In view of this, he said fiscal instruments to improve business conditions and critical infrastructure such as roads, rail and power are needed to stimulate investment in the near to medium term. – Punch.

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