BREAKING: Nigerian Banks Disburse N65.6trn in Loans in 2024 Amidst Economic Pressures

Amid macro-economic challenges and competition with Fintechs, 10 Nigerian banks operating in the country, Sub-Sahara Africa countries (SSA) and other parts of the world granted N65.6 trillion loans to customers in 2024 financial year.

The loans granted last year represent about 41.2 per cent increase over N46.46 trillion recorded in 2023.

The 10 banks are Access Holdings Plc, Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa Plc (UBA), Ecobank Transnational Incorporated (ETI), and First Holdings Plc.

Others are FCMB Group Plc, Wema Bank Plc, Stanbic IBTC Holdings Plc, and Fidelity Bank Plc.

THISDAY analysis of the banks’ financial reports showed that oil and gas, general commerce, lending to government and manufacturing sectors dominated their exposures.

The audited results for the year ended December 31, showed that ETI, followed by Access Holdings granted the highest loans to customers amid expanding branch frontier to key African countries.

According to the results, ETI’s loans to customers stand at N15.35 trillion, up by 53 per cent from N10.03 trillion in 2023, while Access Holdings declared N11.5 trillion as loans to customers in 2024, representing an increase of 42.9 per cent from N8.04 trillion declared in 2023.

Zenith Bank during the period under consideration granted N9.97 trillion loans to customers, a growth of 52 per cent from N6.6 trillion in 2023.

Zenith Bank said the growth in loans to customers was partly due to the revaluation of foreign currency denominated loans as well as growth in local currency loans.

First Holdco generated N8.77 trillion loans to customers in 2024, up by 37.8 per cent from N6.36 trillion in 2023.

Meanwhile, UBA reported N6.95 trillion loans to customers in 2024, about 33 per cent growth from N5.2 trillion in 2023, which meant the lender in the period granted about N1.73 trillion more loans to customers.

On its part, GTCO granted N2.79 trillion loans to customers, representing an increase of 12.3 per cent from N2.48 trillion in 2023.

GTCO, in a presentation to investors and analysts, said it continued to maintain a well-distributed loan book with specific focus on asset quality across select business segments.

The bank explained, “The contribution of the oil and gas sector to the gross loans portfolio at the bank level improved to 48 per cent in FY-2024, from 50 per cent in FY-2023 due to derecognition of a key financial asset.

“Upstream and midstream sector contribution dropped to 25.57 per cent from 31.24 per cent, and 14.14 per cent to 8.91 per cent, respectively, while downstream, and natural gas increased to 4.57 per cent and 8.88 per cent from 3.29 per cent and 2.54 per cent, respectively, between FY-2023 and FY-2024.

“Contributions of the manufacturing sector increased to 20.99 per cent, agriculture increased to 8.37per cent, and information, telecoms, and transport also increased to 6.94 per cent.”

While Fidelity Bank Plc granted N4.38 trillion as loans to customers, FCMB Group’s loans to customers stood at N2.36 trillion in 2024. Also, Wema Bank Plc granted N1.2 trillion loans to customers in 2024 while Stanbic IBTC Holding’s loans stood at N2.35trillion during the period under review.

S&P Global Ratings, in a report titled, “Nigerian Banking Outlook 2025: Resilient Performance Amid Macroeconomic Pressures,” stated that the naira depreciation inflated the amount of loans in 2023 and 2024, with nominal loan growth of 50 per cent-60 per cent but real loan growth had been muted.

Analysts at S&P Global Ratings forecasted that loan growth will average 25 per cent-30 per cent in 2025, stressing, “Increased refinery capacity will support lending to the oil and gas sector, while the recapitalisation of the banking sector will increase banks’ lending firepower.

“Nigeria’s household and corporate leverage metrics are among the lowest of the country’s peer group. Low wealth levels per capita and a large informal economy contribute to low financial intermediation.”

The global rating agency said it expected the banking sector to remain in a net external debt position well below 10 per cent of system-wide loans through 2026.

The report stated, “The sector has low reliance on external debt, while banks continue to grow their foreign assets through subsidiaries in the U.K., U.S and France. The financial sector is, however, vulnerable to investor sentiment, as U.S. dollar scarcity persists and the country remains on the FATF’s grey list.

“Nigerian banks’ funding largely comprises customer deposits, which account for more than 80per cent of their funding base. Our loan-to- deposit ratio assumes that only half of corporate deposits are core deposits. We expect the loan-to-deposit ratio to remain stable, ranging between 95per cent and 100per cent.”

In 2024, the average prime lending rate to bank customers in Nigeria closed at 18.56 per cent, the highest point since 2010, as interest rate or Monetary Policy Rate (MPR) last year gained momentum.

Data showed that average prime lending rate that opened 2024 at 13.82 per cent, gained 474 basis points to close 2024 at 18.56 per cent amid an increase in MPR from 18.75 per cent to 27.50 per cent.

The rate’s highest peak was 18.74 per cent in February 2010, when MPR was at six per cent.

The prime lending rate is the interest rate that banks charge their most creditworthy customers, usually large corporations and it serves as a benchmark for many other loans, including personal and business loans.

In Nigeria, the prime lending rate in the banking sector is influenced by monetary policy, inflation, liquidity in the banking system and economic conditions.

THSIDAY checks revealed that Nigeria’s average prime lending rate reached an all-time high of 19.66 per cent in November 2009 and a record low of 11.13 per cent in March 2021.

The steady increase in MPR reflected in the average prime lending rate last year as Central Bank of Nigeria (CBN) intensified its effort to tackle inflation and stabilise the local currency at the foreign exchange market.

The first hike in MPR was from 18.75 per cent to 22.75 per cent, the second to 24.75 per cent, the third to 26.25 per cent, the fourth to 26.75 per cent and recently 27.25 per cent in the September 2024 Monetary Policy Committee (MPC) meeting.

MPR moved to 27.50 per cent in November 2024, with the average prime lending rate jumping to 18.39 per cent in November 2024 to eventually close last year at 18.56 per cent.

The increases, totalling 875 basis points in MPR since Mr. Olayemi Cardoso’s appointment, had been driven by efforts to tackle the country’s persistent inflation challenges, which included high core and food inflation.

An investigation by THISDAY showed that the increase in MPR impacted on banks average prime lending to their customers late year.

Analysts attributed the increase in average prime lending rate to the hike in MPR and severe macroeconomic challenges.

Investment banker and stockbroker, Mr. Tajudeen Olayinka, stated that banks reviewed their lending rates on regular basis, subject to their respective cost of funds and the direction of MPR, not necessarily using MPR as a distinct value.

According to Olayinka, the MPR signals to them the direction of interest rate in the market and the price they will pay if they have to borrow from or lend to CBN.

He stated, “Therefore, their deposit mix, which includes idle customers’ deposits, determines what their weighted average cost of funds would be. They then factor in the signal from MPR, to enable them to arrive at their various prime lending rates, which are usually reserved for their prime customers.

“But with all these recent circulars from CBN concerning idle deposits and foreign exchange windfalls, the market should prepare for a prolonged high interest rate regime.

“CBN doesn’t seem to have a good understanding of its recent destructive policies.”