• As credit to sector drops by N600bn

The financial constraints rocking Nigeria’s private sector worsened in second quarter of this year following a decline in total loans granted it by commercial banks.

Lending to the private sector, according to statistics released by the National Bureau of Statistics (NBS) declined by N600.60 billion, from N16 trillion in the first quarter of 2017 to N15.34 trillion, in the second quarter of 2018.

NBS report on Selected Banking Sector Data: Sectoral Breakdown of Credit, e-Payment Channels and Staff Strength (Q2 2018), recently released, revealed that credit to the private sector declined for six consecutive quarters, as the public sector borrowing continued to crowd it out in the financial market.

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A breakdown of the total N63.27 trillion credit provided in 2017 by banks to finance activities of the private sector shows that N16 trillion was lent out in the first quarter.

The second, third and fourth quarters recorded N15.7 trillion, N15.83 trillion and N15.74 trillion, respectively. According to the report, banks lent N15.6 trillion to the private sector in Q1 2018, while the total value of credit allocated by banks stood at N15.34 trillion as at Q2 2018.

This was as credit allocation to the oil & gas sector increased to N3.45 trillion in Q2 from N3.42 trillion in Q1 2018, while financing to the manufacturing sector dropped to N2.02 trillion from N2.07 trillion in Q1. The money lent to the agriculture sector increased to N523.08 billion from N501.6 billion recorded in Q1, power and energy dropped to N416.34 billion from N426.5 billion, while mining and quarrying also declined to N10.18 billion from N10. 461 billion in Q1. While credit to government increased to N1.47 trillion from N1.411 trillion, trade/general commerce decreased from N1.054 trillion to N1.044 trillion, finance, insurance and capital market also dropped to N991.22 billion from N999.491 billion.

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Similarly, funding to real estate sector declined to N744.56 billion from N784.228; as Information Communication and Technology (ICT) received N814.57 billion with construction getting N612.85 billion, during the period under review.

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The education sector received N71.8 billion, while transportation and storage and other sectors received N304.4 billion and N361.7 billion, respectively.

Lamenting the crowding out of the private sector by the government during the period, president, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, said Deposit Money Banks (DMB) had consistently showed reluctance to lending to the real sector of the economy.

“One of the greatest challenges facing the manufacturing sector in the country is lack of long-term financing and high interest rate. It is disturbing to us that banks are not lending as much as we need because that is the only way to grow the economy,” he said.

Similarly, Mr. Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry (LCCI), said more funds should be allocated to the private sector to enhance productivity, employment and economic growth.

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“If lending is declining, it shows that there is a lot of work to be done. Some of the issues affecting private sector lending need to be revisited. When the economic environment is not too conducive, the risk of lending to the private sector increases,” he said.