FBNQuest, a firm of analysts, has commended the banks for extending N3.3 trillion to the economy over the last one year. The firm sees the credit growth as one bright spot in the nation’s developmental effort, especially the 21 per cent increase in the loan books of deposit money banks over 12 months.
Gregory Kronsten, an analyst at the company, explained that for manufacturing, the increase has been closer to 35 per cent.
He said: “As well as leaning on the banks to boost lending as their regulator, the Central Bank of Nigeria has also multiplied and deepened its own credit interventions over the period. The beneficiaries are not identifying themselves and probably include few SMEs, yet the increase should help businesses in their hour of need,” he said.
The investment and research firm, added: “We see better access to bank credit and more government spending on the agenda too, but the principal driver of the (negative) growth number this year is Nigeria’s position a little apart from the global village. Its large agricultural economy and sizeable domestic market, together with limits to its international integration, together mean that its GDP will contract in 2020 by rather less than many of its peers. For the same reason (its uneven development), the rebound next year is set to be modest”.
It also said the Nigeria Bureau of Statistics (NBS) data shows a better-than-expected return to work after lockdown, particularly in rural areas. Most returnees work in agriculture and non-farm household firms.
However, respondents are returning to companies with a fall in revenue relative to pre-COVID and with magnified operating challenges. Farmers have generally reduced the area planted to crops. There are large gaps in the safety nets of many households.
“Closing with the impact of the virus on inflation, there are downward pressures such as a further weakening in consumption patterns due to the lockdown. However, there are also upward pressures such as the shutdown of factories and general supply chain disruptions. Our take is that the headline rate will see a further modest rise to 13.1 per cent year-on-year at year-end 2020 from 12.6 per cent in June.