Banks Increase Loan Size by 57% to N37.2 Trillion

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Banks Increase Loan Size by 57% to N37.2 Trillion

In the face of stringent monetary policies and economic downturns, the loan portfolios of Nigeria’s top Deposit Money Banks (DMBs) saw a significant expansion in 2023, soaring by 57 percent to reach N37.17 trillion compared to the N23.68 trillion recorded in 2022.

This remarkable surge in credit was primarily propelled by key players such as Access Bank, Zenith Bank, First Bank, Guaranty Trust, United Bank for Africa (UBA) Plc, Fidelity Bank, GT Bank, Stanbic IBTC, Sterling Bank, Wema Bank, and FCMB. Analysis of the loan books revealed that tier-1 banks dominated the collective portfolio, boasting the highest value and growth rates.

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Access Bank secured the top spot leading the pack with a loan portfolio of N8.04 trillion, closely followed by Zenith Bank with N6.56 trillion and First Bank with N6.36 trillion.

United Bank for Africa (UBA) Plc significantly increased its loan book to N5.23 trillion, while a tier-2 bank, Fidelity Bank Plc, broke into the top five with a loan size of N3.09 trillion, pushing GT Bank into sixth position with N2.48 trillion.

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Furthermore, another tier-2 bank, Stanbic IBTC Bank, emerged as the leader in industry growth rate, witnessing a remarkable 68.6 percent surge in its loan book to N2.03 trillion in 2023. Following closely behind was First Bank, a tier-1 bank, with a 68 percent increase, and UBA secured the third position in growth rate with a 66.7 percent surge.

According to Agusto & Co, a firm of financial analysts, in their 2023 Banking Industry Report, the banks capitalized on the escalating liquidity resulting from the elimination of ‘arbitrary’ cash reserve ratio (CRR) debits to bolster their loan portfolios.

The report stated, “With the inauguration of President Tinubu, the new administration has initiated several reforms aimed at rectifying prevailing macroeconomic imbalances. These reforms, including the removal of petrol subsidies, exchange rate harmonization, tax reforms, and the reinstatement of a methodological framework for calculating cash reserve requirements (CRR), present growth opportunities for the industry.”

It continued, “We anticipate that many banks will seize the opportunity of rising liquidity following the eradication of arbitrary CRR debits to expand their loan books, particularly as the working capital needs of businesses continue to escalate amidst a weakening domestic currency and other inflationary pressures.”

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“We expect that the bulk of the new loan disbursements will be directed towards traditional sectors such as manufacturing, oil and gas, and general commerce, among others, as well as resilient players in the face of the volatile operating environment. Emerging sectors like renewable energy, health, and gender-based businesses are also poised to benefit.”

Analysts at Cardinalstone, an investment banking firm, remarked, “This surge in credit growth was largely fueled by the impact of currency devaluation on banks’ foreign currency loans. However, we foresee 2024 as a year of correction for credit growth due to the persistent macroeconomic challenges in the country.”

They added, “Banks are likely to adopt more restrictive credit lending policies, focusing on sectors and borrowers deemed relatively more creditworthy. Consequently, we anticipate that full-year 2024 loan growth will revert to a four-year mean of 19.9 percent.”

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