Leaders of the Organised Private Sector (OPS) have described the shrinking credit from the Deposit Money Banks (DMBs) to real sector and other critical value-adding sectors of the economy as undesirable for the nation’s economic growth.
The top OPS players spoke against the backdrop of the latest statistical figures published by the National Bureau of Statistics (NBS) on the lending to major sectors of the economy which showed that manufacturing, trade and agricultural sectors got far below their funding needs from the commercial banks.
The National Bureau of Statistics’ (NBS) latest report on ‘Selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength (Q2 2018’ indicated that
Banks’ lending to the private sector declined by N600.60 billion over the past six quarters,
Specifically, the Bureau reported that total credit to the OPS dropped from N16 trillion recorded in the first quarter of 2017 to N15.34 trillion, as at the second quarter of this year.
According to the data, out of the total N63.27 trillion credit provided in 2017 by banks to support private sector operations, N16 trillion was provided in the first quarter while N15.7 trillion, N15.83 trillion and N15.74 trillion respectively were lent to the OPS in the second, third and fourth quarters of the year.
Reacting to the development, the President of the Manufacturers Association of Nigeria (MAN), Dr Frank Jacobs, lamented that the banks had consistently shown reluctance to lend to the real sector of the economy.
Jacobs pointed out that one of the greatest challenges facing the manufacturing sector in the country was lack of long-term financing and high interest rate, saying that it is worrisome that the banks are not lending as much as the real sector needs given the fact that offering credit to the OPS is the only way to grow the economy.
Despite the challenge, the MAN leader, who commended the Central Bank of Nigeria (CBN) for its plan to implement a special regime to make funds available to the manufacturing and agriculture sectors at nine per cent interest, said that the association would continue to engage the banks to bridge the funding gaps.
Jacobs explained further that in order to stimulate economic growth, recovery and rapid industrialisation, funds should be provided by banks to the real sector at five per cent.
Commenting on the bank’s shrinking lending to the OPS, Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, aligned his views with Jacobs’, saying that more funds should be allocated to the private sector to enhance productivity, employment and economic growth.
He explained: “If lending is declining, it shows that there is a lot of more work to be done. Some of the issues affecting private sector lending needs to be revisited. When the economic environment is not too conducive, the risk of lending to the private sector increases.”
The OPS leader canvassed the need for fiscal and monetary policies alignment as a strategic option of reducing the risk of lending to the private sector and making the operating environment more enabling for businesses.