Credit extended by banks in Nigeria to the nation’s manufacturing sector rose by 53.71% year-on-year ,YoY, to N8.70 trillion in the first quarter of 2024 (Q1’24) from N5.66 trillion in the same period in 2023 (Q1’23), an increase of N3.04 trillion.
Available data from the Central Bank of Nigeria ,CBN, shows that the manufacturing sector was the third highest recipient of bank loans in Q1’24, trailing only the oil and gas, general sectors.
The apex bank reported that the total banking sector credit to the Nigerian economy in the quarter was N53.2 trillion, indicating that the manufacturing sector received about 16.35% of the total loans within the period.
Further analysis shows that the manufacturing sector contributed 9.98% to the real Gross Domestic Product ,GDP, in Q1’24, down from the 10.13% contributed by the sector in Q1’23. This however represents a 1.90 percentage point increase from the 8.23% contribution by the sector in the preceding quarter (Q4’23).
The report also showed that the sector grew by 1.49% during the quarter, which represents a 0.12 percentage point drop from the 1.61% growth rate in Q1’23.
The CBN statistics noted that the oil and gas sector emerged as the top recipient of bank loans in Q1’24 with a loan of N10.99 trillion, marking a 125.41% increase over N4.88 trillion recorded in Q1’23.
The general sector ranked second in bank credit in Q1’24 with a 213.98 percent surge in lending to N8.75 trillion in bank credit from N2.79 trillion in Q1’24.
Also among the top 10 sectors with highest bank credit in Q1’24 are: Oil and Gas Services sector, which secured N3.88 trillion in bank credit against N1.96 trillion in Q1’23, showing a significant 97.96% increase; Trade and General Commerce received N3.80 trillion, up from N2.33 trillion, reflecting a 63.09% increase; Finance, Insurance, and Capital Market sector credited with N3.41 trillion, up from N2.64 trillion in Q1’23, indicating a 29.17% increase; and Government sector which received N2.58 trillion, slightly down from N2.60 trillion in Q1’23, showing a 0.77% decrease.
Others include: Agriculture which secured N2.58 trillion in bank credit, representing a 36.51% increase from N1.89 trillion in Q1’23; Construction sector with N1.83 trillion loan, up from N1.16 trillion, marking a 57.76% increase; and Information and Communication sector which received N1.67 trillion, reflecting a 30.47% increase from N1.28 trillion in Q1’23.
The manufacturing sector has continued to depend heavily on bank loans for working capital and capacity expansion, underscoring the resilience of the sector as reflected in the lending patterns of major banks.
However, manufacturers have been accessing these bank loans at a very high cost.
For instance, data from CBN showed average maximum lending rates at 27.98% and 28.09% in 2023 and 2022, respectively. The situation appears even grimmer for manufacturers this year as average prime lending rate and maximum lending rate have risen to 20.65 percent and 30.25% respectively, in Q1’24.
In 2023, the manufacturing sector’s borrowings from the nation’s banking sector increased by 38.8 percent to N7.73 trillion from N5.57 trillion in 2022. The apex bank has continued to tighten banking sector liquidity by raising interest rates aimed at curbing the galloping inflation in the country.
Director General of the Manufacturers Association of Nigeria ,MAN, Segun Ajayi-Kadir, has blamed the incessant hike in the benchmark interest rate by CBN as a major factor limiting manufacturers’ access to credit, leading to high cost of funds.
“The hike in lending rate will continue to increase the cost of borrowing, impact operating costs, prices of products and profit margins, and make Nigeria’s goods less competitive to products from other nations”, he said.
