Drop in T-Bills Yields to Boost Banks’ Credit to Private Sector—FSDH

By Modupe Gbadeyanka

Analysts at FSDH Research have expressed their expectation for a growth in the banking sector credit to the private sector in 2018.

In its latest report, the investment firm said the improvement in the macroeconomic and business environment; improved consumers’ confidence; and the drop in the yields on the Nigerian Treasury Bills (NTBs) are the main drivers of the expected credit growth.

FSDH Research recalled that the provisional figure released for Q4, 2017 by the National Bureau of Statistics (NBS) showed that the banking sector credit to the private sector dropped from N16.1 trillion in Q4, 2016 to N15.7 trillion in Q4 2017.

Although the total credit as at the end of 2017 was higher than the figure of N13.1 trillion in Q4 2015, the impact of the devaluation of the local currency may be responsible for the growth in 2017 over 2015.

The sector with the highest credit allocation as at Q4 2017 was Mining and Quarrying as well as Petroleum Marketing, which accounted for 28 percent of the total banking sector credit to the private sector.

This was followed by Manufacturing 14 percent; General Services 18 percent; and Trade 7 percent.

In its report, FSDH Research said, “We note that Agriculture, which contributed about 29 percent of the Gross Domestic Product (GDP) in Nigeria in Q3 2017, attracted 3 percent of the total credit.

“Our findings show that the Agriculture sector in Nigeria is faced with many problems. Thus the sector is unable to attract the required credit.

“Some of the problems are: inadequate storage facilities; poor transport network; inadequate research to develop improved seedlings; and weak integration between the sector and the manufacturing sector in providing manufacturing inputs.

“FSDH Research expects the banking sector credit to the private sector to grow to N16.7 trillion in 2018, representing a growth of 6.34 percent from N15.7 trillion recorded in 2017.

“The manufacturing sector should attract the highest credit. The uncertainties surrounding the fuel subsidy in the petroleum marketing sector may lead to a contraction of credit to the sector.”