We see from the CBN’s most recent Quarterly Statistical Bulletin (QSB) that deposit money banks (DMBs) aggregate credit extension to the economy increased by 5% q/q to NGN28.2trn in Q3 ’22. The data is a narrower measure of private sector credit extension (PSCE), as applied only to DMBs’.  As such, it excludes credit extension by the CBN and state-owned development banks, such as the Bank of Industry. Similar to the broader measure of PSCE, which we discussed yesterday (Good Morning Nigeria 20 February 2023), DMBs credit lending to the economy has grown robustly over the past year. As at Sept ’22, DMB’s loan growth to the economy was roughly c.24% y/y.

The oil and gas sector (including services) was the largest recipient of credit extension from DMBs' with a share of 22.7% of total credit. DMBs’ credit extension to the sector increased by 17% y/y.

Although most of the DMB’s increased exposure to the sector can be linked to the elevated price of crude oil for most of last year, a slight depreciation of the naira also contributed.

Manufacturing sector was the second largest recipient of DMBs credit. While the sector’s share of total credit was unchanged q/q at 18.1%, it increased from 16.5% in the year-earlier period.

Other notable sectors with respect to credit extension include financial and insurance, and trade and general commerce, which accounted for 8.5% and 7.1% of total credit respectively.

DMBs lending to the government accounted for 8% of the total loan book. At NGN2.2trn, DMB’s credit to the government stood at just around 10% of total lending to the government (including CBN and other agencies)

Credit to the agriculture sector was just around c.5.9% of DMB’s total credit. Although the CBN also targets the sector through its numerous intervention schemes, the loans are still not enough to satisfy the credit demand of the sector, particularly those of small-scale farmers.

Looking ahead, we expect a slow-down in DMBs credit growth as the rate hikes by the monetary policy committee get fully transmitted to the economy.