In 2023, Nigeria’s manufacturing sector, which contributes approximately 8% to the nation’s GDP, saw significant financial movements despite facing several economic challenges.
The sector’s GDP growth edged up to 1.49% in the first quarter of 2024, a slight increase from the previous quarter’s 1.38%.
This growth, although modest, underscored the sector’s resilience amid economic turbulence.
Economic conditions in 2024 were far from favourable as the manufacturing sector grappled with depreciating exchange rates, soaring inflation, and dwindling purchasing power.
In response to these inflationary pressures, the Central Bank of Nigeria introduced higher interest rates and tightened banking sector liquidity, aiming to curb inflation.
Despite these measures, manufacturers continued to depend heavily on bank loans for working capital and capacity expansion.
Data from Stanbic IBTC revealed that Nigeria’s PMI rose to 52.1 in May 2024 from 51.1 in April 2024, indicating a slight improvement as manufacturers struggled with these economic headwinds.
The resilience of the sector was also reflected in the lending patterns of major banks, which continued to support manufacturers with substantial loans.
In 2023, the total loans provided by the top lenders to the manufacturing sector amounted to N5.7 trillion, up from N4.3 trillion in 2022, marking a significant 31% increase.
While a portion of this growth was attributed to exchange rate revaluation for foreign currency-related loans, analysts also pointed to genuine growth in lending activities.
These were the top 5 lenders according to Nairametrics findings.
UBA Plc was one of these key lenders, increasing its loans to the manufacturing sector to N495.8 billion, up from N468.6 billion in 2022.
This rise included a substantial increase in term loans, which climbed by N93.2 billion, although overdrafts saw a decrease of N66.1 billion.
During the fiscal year, UBA’s term loans to the sector increased by N93.2 billion from N267.2 billion as of FYE 2022 to N360.46 billion as of FYE 2023.
However, there was a decrease in overdrafts by N66.1 billion from N201.4 billion as of FYE 2022 to N135.3 billion as of FYE 2023.
Stanbic IBTC also ramped up its lending, reaching N651.8 billion in 2023 from N425 billion in 2022, a notable 53% increase. During the fiscal year, the manufacturing sector was the highest contributor to Stanbic’s loan portfolio.
The bank’s gross lending to the oil and gas sector was N419.6 billion in 2023.
The presence of Stanbic IBTC on this list can be linked to its relatively low prime lending rates to manufacturers in 2023. Stanbic IBTC had a prime lending rate of 8% to manufacturers for most of 2023.
Access Bank followed suit with a 12% increase in loans to the manufacturing sector, amounting to N839.1 billion by the end of 2023. This increase was spread across various manufacturing sub-sectors, including food manufacturing and steel rolling mills.
As of FYE 2023, Access Bank’s gross loans to manufacturers hit N839.1 billion, from N746.4 billion as of FYE 2022.
The bank’s loans to manufacturers during the fiscal year consisted of N304 billion for food manufacturing (FY 2022: N244 billion), N85.2 billion for cement makers (FY 2022: N151.9 billion), N104.6 billion for steel rolling mills (FY 2022: N108.8 billion) and N345.3 billion for other manufacturing industries (FY 2022: N241.7 billion).
First Bank of Nigeria recorded a remarkable 68% increase in loans to manufacturers, reaching N1.29 trillion in 2023, up from N769.7 billion in 2022.
This growth was driven primarily by a surge in term loans, although overdrafts significantly declined. Of the amount, N1.01 trillion comprised term loans, as First Bank’s term loans to manufacturers increased by 154% from N399 billion as of FYE 2022.
The bank’s overdrafts to the sector declined by 83% from N234.6 billion as of FYE 2022 to N40.7 billion. However, the bank’s project financing for the manufacturing sector increased by 74% to N237.5 billion, from N136.2 billion as of FY 2022.
Zenith Bank emerged as the top lender in the manufacturing sector, with loans increasing to N1.6 trillion in 2023 from N1.25 trillion in 2022. Despite a substantial rise in impairment allowances for loans, the net carrying amount for these loans remained robust.
During the fiscal year, the impairment allowance for loans to the manufacturing sector totalled N157.4 billion, resulting in a net carrying amount of N1.44 trillion for these loans.
The impairment provision on loans to the manufacturing sector increased by over 1300%, from N10.7 billion for FY 2022 to N157.4 billion for FY 2023.
- Other notable mentions include Fidelity Bank, which saw a marginal increase in loans to N357.5 billion, and GT Bank, which increased its lending to N308.9 billion.
- Wema Bank also significantly boosted its lending to manufacturers by 93%, reaching N147.6 billion.
- Fidelity Bank’s loans to manufacturers increased marginally in 2023 by N15.6 billion to N357.5 billion, from N341.9 billion as of FYE 2022. GT Bank’s lending to manufacturers also increased by N34.9 billion to hit N308.9 billion as of FYE 2023, from N341.9 billion as of FYE 2022.
- Wema Bank increased its lending to manufacturers by N71 billion, representing a 93% increase from N76.6 billion as of FYE 2022 to N147.6 billion as of FYE 2023.
Overall, the cost of these loans remained high, with benchmark interest rates in Nigeria at 18.75% as of the end of 2023.
For example, Zenith Bank’s prime and maximum lending rates for manufacturers were 19.38% and 30%, respectively. UBA’s lending rates to the manufacturing sector were even higher, ranging between 28.50% and 32%.
The manufacturing sector’s continued reliance on bank loans despite these high costs highlights the sector’s critical role in driving economic growth.
The significant increase in loans from top banks indicates a strong, albeit cautious, confidence in the sector’s potential to overcome economic challenges and contribute to Nigeria’s economic stability and expansion.
