Credit To Private Sector: Agriculture Sector Credit Still Lagging

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Recently, the National Bureau of Statistics (NBS) published its selected Banking Sector data for Q3-1 9. According to the report, total banking sector credit to the private sector grew by 4.2% y/y and 7.4% q/q to N1 6.3t n in Q3-1 9. This was as the CBN increased the minimum Loan to Deposit ratio of banks to 6 0.0% and later to 6 5.0%.

Further analysis revealed that the bulk of the credit goes t o the Oil & Gas (2 8.0%) and Manufacturing (1 5.8%) sector. Shockingly, credit to the Agriculture sector, which accounts for 2 0%-2 5% of Nigeria’s GDP, remained underwhelming at 4.1% of the total loan despite increased government focus on the sector. Hence, the question is, why are banks
reluctant to lend to the Agriculture sector regardless of the opportunities in the sector.

Credit To Private Sector: Agriculture Sector Credit Still Lagging

In our view, despite the apparent potentials (large market size, favourable government policies, and fertile land) in the sector, we believe banks are spooked by the risk associated with the sector. Some of the risks are the vulnerability of crops/livestock to diseases, insecurity, and the poor state of key infrastructures (electricity, good road network, and adequate storage facility), which continued to hampered growth. Accordingly, we believe for banks to give attention to the sector, the government, rather than creating different intervention schemes, should work harder on de-risking the sector by ending insecurity, investing In storage and logistics infrastructure as well as fund research and development to boost crop/stock yield in the sector.

Read Also:  Nov-19 PMI Report: Manufacturing Activities Continue To Flourish?
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United Capital Research

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Credit To Private Sector: Agriculture Sector Credit Still LaggingCredit To Private Sector: Agriculture Sector Credit Still Lagging

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Credit To Private Sector: Agriculture Sector Credit Still LaggingCredit To Private Sector: Agriculture Sector Credit Still Lagging

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