Nigeria’s private sector lending soared by an impressive 70.3% in the first nine months of 2024, with the oil and gas and manufacturing sectors taking the lion’s share of loans, according to data from the Central Bank of Nigeria (CBN).
Total credit to the private sector (CPS) reached N463.74 trillion, up from N272.2 trillion during the same period in 2023. This sharp rise highlights the growing role of banks in driving economic activity despite Nigeria’s relatively low credit-to-GDP ratio of 33.3%, far below South Africa’s 92.4%.
Key Beneficiaries of Bank Loans
Oil and Gas Sector
The oil and gas sector led the credit allocation, receiving N111.5 trillion—a staggering 112.3% increase from N52.5 trillion in 2023. As the backbone of Nigeria’s economy, this sector remains a critical driver of revenue and foreign exchange, underlining its dominant role in the financial ecosystem.
Manufacturing Sector
Manufacturing, essential for industrialisation and economic diversification, secured N85.8 trillion in loans—a 51% rise from N56.8 trillion in 2023. The sector contributed 8.21% to Nigeria’s GDP in the third quarter of 2024, reflecting modest but steady growth.
Finance, Insurance, and Capital Markets
This sector saw a 103% increase in bank credit, rising to N53.9 trillion from N26.5 trillion. The sector’s GDP contribution rose to 5.51%, with a year-on-year growth of 30.83%, underscoring its critical role in fostering economic stability and growth.
General Sector
Loans to the general sector, which includes a mix of unspecified economic activities, grew by 79.4% to N48.8 trillion, reflecting broad-based lending across various industries.
Drivers of Growth
The remarkable increase in private sector credit can be attributed to:
- FX Revaluation Gains: Boosted by currency adjustments in the financial system.
- CBN Policies: Initiatives such as the loan-to-deposit ratio and incentives for real sector lending have spurred growth.
CPS encompasses loans, trade credits, other account receivables, and financial support extended to private enterprises, reflecting banks’ pivotal role in economic development.
Challenges and Outlook
Despite the surge in lending, Nigeria’s credit-to-GDP ratio remains low, indicating untapped potential for financial deepening. Analysts expect continued credit expansion as banks and policymakers aim to improve access to finance for underserved sectors.
The banking sector’s focus on oil, manufacturing, and financial services demonstrates the alignment of credit flows with national economic priorities. However, experts emphasise the need for diversified lending to strengthen other key areas like agriculture and technology.
