The total banking sector credit to the Nigerian economy more than doubled year-on-year rising to about N53 trillion at the end of the first quarter of 2024.
This is according to the latest data from the Central Bank of Nigeria (CBN) showing the banking sector’s lending to different sectors of the economy.
Based on the data, the oil and gas sector dominates with about 28% of total lending, having over N14.7 trillion in debt in the period under review.
This compares to just N6.8 trillion in the same period in 2023, highlighting the impact of exchange rate depreciation.
What the data says
Nigerian banks’ total sectorial credit topped N53.2 trillion in 2024, which is 76% higher than the N30.3 trillion reported same period in 2023. It also represents a 20% increase from N44.5 trillion recorded at the end of 2023.
Nairametrics further observed that Nigeria has a low credit to Gross Domestic Product (GDP) ratio of 22%, which is far lower than the 70% recorded in South Africa.
In the first three months of 2024, about N8.7 trillion have been borrowed from banks in Nigeria.
The oil and gas sector led the pack with about N10.9 trillion in lending to the upstream sector and another N3.8 trillion to the service sector, which means that the sector has about N14.7 trillion in debt from banks as of March 2024.
The size of lending to the oil and gas sector has dominated banking sector credit for decades as commercial banks tie the foreign currency earnings capabilities of the sector as a derisking factor.
Loans to this sector are largely denominated in foreign currency and may have been impacted by the exchange rate devaluation.
The CBN data shows that while debt to the upstream sector increased by about N2.6 trillion, the downstream sector accumulated N440 billion in fresh credit in Q1 2024. This further shows that oil and gas firms operating in the upstream sector are the bigger beneficiaries of banks’ credit in Nigeria.
Other top bank credit beneficiaries
According to the CBN data, other top beneficiaries of bank credit are in the general sector and manufacturing sector.
While the general sector holds about 17% of total bank credit, the manufacturing sector holds about 16%.
Firms in the general sector recorded an increase of N4.9 trillion in three months, having about N8.8 trillion in bank credit by March 2024.
The manufacturing sector recorded a more subdued increase of about N1 trillion in three months, having a total sectorial credit of N8.7 trillion, which is about 53% higher than the N5.6 trillion recorded a year earlier. The sector has often trailed the oil and gas sector despite representing about 10% of Nigeria’s Gross Domestic Product (GDP).
Nairametrics further observed that although agriculture was the biggest contributor to the GDP at 21.07%, has a total bank credit of N2.58 trillion, which is about 5% of total credit.
Other critical sectors like real estate, power and mining have access to low bank credit, despite being key sectors of the economy.
What you should know
While Upstream operations include identifying, extracting, or producing materials, downstream operations include the post-production of crude oil and natural gas, bringing products to consumers.
The oil and gas sector contributed 6.38% to the GDP in Q1 2024. However, it attracted no foreign capital within this period.
Nairametrics earlier reported that 10 Nigerian financial institutions were instructed to set an agenda for oil and gas development in line with the Net Zero Asset Owner Alliance under the United Nations Environment Program Finance Initiative (UNEPFI). The Nigerian financial institution members named under the finance initiative are Access Bank, Jaiz Bank, Zenith Bank, Bank of Industry, Continental Reinsurance, Custodian Investment Limited, Fidelity Bank, Guaranty Trust Bank, Polaris Bank, and Wema Bank.
Olu Verheijen, the special adviser on energy to President Bola Tinubu, recently said that the recent oil and gas reforms by President Bola Tinubu are geared towards revamping the economy and improving revenue generation from the sector.
According to her, Nigeria is now emerging as a favoured destination for investments in the global oil and gas industry.
The Nigerian Federal Government has set its sights on a significant revenue boost from the oil sector in 2024, aiming for a staggering 214% increase in Petroleum Profit Tax (PPT) collections.
This ambitious target is outlined in data from the Federal Inland Revenue Service (FIRS), which indicates plans to rake in N9.96 trillion from PPT.
