Manufacturers, traders, others repaid N3.31tn loan in H1 – Report

Layers in the manufacturing, trade, power, mining, construction and five other sectors paid N3.31tn to offset loans obtained from commercial banks between January and June 2024, Sunday PUNCH reports.

According to the sectoral distribution of credit data obtained from the latest Central Bank of Nigeria statistics bulletin, these sectors opted to reduce their credit obligations from N30.75tn to N27.44tn within six months due to the increasing cost of debt servicing.

Other sectors listed in the report included power, oil and gas, information and communication, transportation and storage, and government.

Sectoral credit encompasses loans, trade credits, other receivables, and support from banks to 14 key economic sectors over a specific period, serving as a global indicator of the banking sector’s balance sheet resilience and its contribution to the national economic agenda.

The credit reduction was likely influenced by the interest rate hike stance taken by the Monetary Policy Committee of the Central Bank of Nigeria to fight inflation.

At its last MPC meeting, the apex bank for the fifth time this year, raised the benchmark interest rate by 50 basis points to 27.25 per cent from 26.75 per cent.

The CBN has hiked the benchmark interest rate by 850 basis points or an 8.5 per cent increase in interest rates, under the leadership of Olayemi Cardoso, who took office in September 2023.

The apex bank has maintained a tight monetary policy to combat the high inflation rate.

Financial analysts have noted that the sustained increases in the Monetary Policy Rate were adding to the financing cost burden on key economic sectors, stressing that the amount used to repay loans could enhance or expand their leading to more employment and economic growth.

The Organised Private Sector has also expressed fears that the interest rate hike might worsen bad loans in various Deposit Money Banks.

Despite the rate hikes, eight banks grew their net interest income by 163.19 per cent to N4.79tn in the first half of 2024 from N1.82tn in the same period last year.

An analysis of the report showed that borrowing from commercial banks reduced by 10.76 per cent to N27.44tn.

In the corresponding period of 2023, those sectors were able to secure N5.69tn loans.

The trade and commerce sector repaid the highest sum of N1.05tn within the review period.

It was followed by the Information and communication sector, which repaid N830.28bn loans.

The manufacturing sector repaid N760.12bn to clear part of its debt.

Other sectors that reduced their borrowings included oil and gas with debt repayment of N380.94bn, transportation and storage (N38.39bn), energy (N27.08bn), construction (N124.61bn), power (N28.8bn), and mining and quarrying with (N833m).

Meanwhile, the agricultural, real estate, finance and education sectors increased their loan portfolio to N568.6bn.

Also, the agricultural sector’s indebtedness to banks rose by N24.56bn from N2.42tn in January to N2.44tn in June.

Real estate firms increased their loans by N38.05bn to N1.01tn in June, while loans by finance and capital markets went up by N492.23bn to N6.16tn in the review period from N5.66tn in H1 2023.

Educational firms secured loans worth N13.76bn to improve their services, marking a growth from N103.02bn to N116.78bn in June.