The value of loans given to the private sector by Nigerian banks increased by N3.5 trillion –from N16.251 trillion in June 2019 to N18.632 trillion as at the end of May 2020.
This is according to data obtained by Nairametrics from the Central Bank of Nigeria. According to the data, this growth represents an increase of 21.53%.
Breakdown of loans
At the end of June 2019, a total of N15.13 trillion was given to the private sector. The figure increased to N15.61 trillion by the end of July 2019 before dropping to N15.56 trillion at the end of August 2019.
- Out of the total N18.63 trillion credit to the private sector in May 2020, the Oil and Gas industry (downstream, natural gas and crude oil refining) attracted N3.60 trillion.
- This was followed by the Manufacturing sector which attracted N1.99 trillion within the same period.
- The General Services segment also attracted N1.60 trillion in May 2020.
- The Finance, Insurance and Capital market segment followed with a N1.32 trillion credit.
- The Oil and Gas sector (upstream oil and gas services) attracted N1.29 trillion in May 2020.
- Trade and General Commerce attracted N1.25 trillion.
- During the year, credit to the private sector hit the highest in May 2020 at N18.53 trillion.
- On the other hand, credit to the government rose to the highest at N1.55 trillion in January 2020.
- A closer look shows that credit to government was at its lowest at N1,21 trillion by August 2019.
Drivers of the credit
In the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting communique, which included the personal statements of members of the apex bank’s MPC, Kingsley Obiora, Deputy Governor, CBN, stated that the credits were driven especially by demands from the manufacturing sector, consumer credit, general commerce, information and communication, and agriculture, among others. He said:
“Under the circumstances, the financial system has maintained a sound and stable position, following effective interventions by the CBN.
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“Short-term interest rates continue to suggest some surfeit in the system with average Open Buy Back (OBB) and inter-bank call rates rising to 5.75 and 11.31% in June 2020, from 5.22 and 5.80% in May 2020, respectively.
“Non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4% in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”
An expert’s perspective
All things being equal, the total loans given by banks to the private sector should be more than the figures stated above. But all things are not equal, even as some credit experts have raised concerns about current realities of financial constraints faced by Micro Small and Medium Enterprises (MSMEs) in the country.
While speaking recently during a webinar by the Development Bank of Nigeria, Access Bank’s Group Head of Emerging Business, Ayodele Olojode, explained that MSMEs do not have regular and sustained access to finance at high-interest rates. This problem is coupled with lack of tangible collateral and economic conditions, which hamper their access to finance. She said:
“Risk-sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy.”
She further noted that the credit guarantee industry in Nigeria is still at a nascent stage, where the volume of guarantees and the size of the industry contributions to SMEs remain low compared to peers in other economies.
Note that a credit guarantee scheme provides third-party credit risk mitigation to lenders through the absorption of a portion of the lender’s losses on the loans made to MSMEs in case of default, typically in return for a fee.
In all, Credit Guarantee is the future because it will compensate for insufficient collateral, provide regulatory capital relief for banks, growth for MSMEs, increased economic GDP, and job creation.
Access Bank moves to acquire BancABC Botswana
The Nigerian bank would buy just over 78% of BancABC Botswana for an undisclosed cash amount of about 1.13 times the book value plus a two-year deferred payment.
According to a memo published today, Access Bank, Nigeria’s largest lender, has agreed to buy a majority stake in African Banking Corporation of Botswana for cash, only a month after buying a South African bank.
Stagflation and dollar shortages in Nigeria have frustrated industries and shrunk the lending sector, prompting Access Bank to extend across the African continent. Atlas Mara said in a statement on Monday that the Nigerian bank would buy just over 78% of BancABC Botswana for an undisclosed cash amount of about 1.13 times the book value plus a two-year deferred payment.
Access Bank now has a presence in ten African countries thanks to the agreement with ABC Holdings, a local subsidiary of Atlas Mara, a London-listed company. It should be completed by the end of the second quarter.
Herbert Wigwe, the Chief Executive Officer of Access Group, told the public that the company is focused on growth. “We remain committed to a focused and deliberate expansion strategy in Africa, which we believe will generate solid, long-term returns,” the bank said.
According to Access Bank, BancABC is Botswana’s fifth-largest bank, with a strong retail loan portfolio and plans to expand into corporate and small-to-medium-sized business lending. Nigerian lenders have been looking for new ways to increase profits in the face of slowing domestic inflation, falling government bond yields, and an increase in restructured loans as a result of the COVID-19 pandemic.
In March, Access Bank paid $60 million for a majority stake in South Africa’s Grobank, making it the first Nigerian bank to enter the country. It has also recently signed agreements in Zambia and Mozambique. Access Bank is restructuring into a holding firm to drive its international growth with more than $16 billion in reserves and an emphasis on corporate and retail banking.
How API fintech startups are driving access to financial data across Africa – CEO, Mono
In an interview with Abdulhamid Hassan, CEO of Mono HQ, a fast-rising API fintech startup, we got to understand how their services are beneficial.
In recent times, we have seen APIs grow from just a curious term among tech enthusiasts to become a core to many businesses. API’s have been highly valuable to developers and businesses because it acts as a communication channel between two services.
In Nigeria, API fintech startups have made a tremendous impact in the fintech space with the rise of API startups like Mono, Okra, and Onepipe that are building Africa’s API infrastructure for institutions and third-party companies for different purposes. These startups have garnered investors in a very short period of operation.
Why API startups?
An API makes it easier to integrate applications and services as it facilitates communication between them. APIs allow businesses to create ecosystems around their operations. Today, they are responsible for connecting people and systems thereby enabling the creation of a better user experience by simplifying access to information.
For example, instead of building its own mapping and payment services, Uber was able to leverage public APIs like Google Maps and a payment gateway and then deliver them in a mobile application that ended up changing the entire transportation industry across the globe.
Why open banking is important
Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transactions, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs).
Since fintech startups are fundamentally focused on providing financial solutions, they need access to financial data to continually create new solutions and also prove their value to prospective users. Open Banking provides the opportunity in the form of convenient access to financial data and services for them to scale up their customer base and products.
However, open banking also poses security threats such as data breaches due to poor security, the potential for a malicious third-party app to clean out a customer’s account, or insider threats from financial institutions that have become relatively widespread as more data becomes interconnected.
In an interview with Abdulhamid Hassan, CEO of Mono HQ, a fast-rising API fintech startup, we got to understand what they do and how their services are beneficial.
What was the inspiration for founding your startup?
The inspiration behind founding Mono came in a conversation between myself and Prakhar. We had just realized how difficult it was to find a service that could put all our financial accounts in one place so we could see them at the same time. There’s nothing quite like relating directly to a problem because it means you have first-hand knowledge of the difficulty it presents. We decided to build an app that could power account linking, and that’s how we walked into founding Mono.
What does Mono do and what sets you apart from other fintech startups?
Mono builds APIs and infrastructure that makes it easy for developers and businesses to create better experiences for their users. Our APIs act as a conduit to enable these businesses to access data and financial accounts. We don’t think of ourselves as a fintech startup, we’re more a data company that makes innovation possible. Today, it’s mostly fintech companies that we support with our user identity/account verification, statement collection, and direct debit services. Tomorrow, it could be Edtech or health tech.
What problems are you trying to solve in Nigeria and Africa?
Today, in Nigeria, there are lots of companies with products that require their customers’ financial data to function. Banks don’t have public APIs for businesses and developers to consume. Without this information, services that provide value to customers cannot be delivered optimally. But now, through our APIs, people are able to securely link their financial accounts, share their bank data like statements, transactions, and balances in seconds with other businesses.
Businesses are also able to verify the identity and account information of their users and more. With this infrastructure and these insights, businesses can provide better services and experiences for their customers, mitigate identity fraud, and even create new products off the back of these possibilities.
So, we’re solving the problem of inaccessibility to data and financial accounts, and enabling businesses to innovate and build for their customers.
Do you believe Nigeria is truly ready to adopt an open banking system?
We believe that while Open Banking is a fairly new financial practice in Nigeria, its adoption is spreading rapidly. This innovation can grow to make the adoption necessary, rather than something the financial system in the country has to be ready for.
What would be the role of API companies such as yourself in encouraging open banking in Nigeria?
Apart from powering more businesses in the African ecosystem to create endless possibilities and personalized experiences for the everyday user, our role is also to be an example of upheld data and privacy ethics.
What are your plans for expanding into other African markets?
Mono started out in Nigeria, but our mission is to power the internet economy in Africa. Our expansion plans see us moving into Ghana and Kenya, first to understand each market and the ways that Mono’s services can solve their problems, and then establish ourselves there.
Since APIs are an effective way to enable the digital transformation of businesses, the ability for businesses to innovate and become early adopters of API services is the key to success and this will allow companies to move into new markets that they may never have considered.
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