A total of N2.01tn was granted as loans by the Deposit Money Banks to the manufacturing sector within one year covering July 2017 to June 2018, an analysis of the banking sector credit report of the National Bureau of Statistics has revealed.
The report, which was obtained by one of the leading Nigerian dailies on Thursday, however, showed that the credit from banks to manufacturers declined by N249bn, from N2.26tn recorded the previous year.
A further analysis of the report indicated that the credit initially dropped from N2.26tn as of the end of the third quarter 2017 to N2.17tn in the fourth quarter of 2017.
Between the fourth quarter of 2017 and the first quarter of 2018, the report showed that credit to manufacturers further declined by N100bn from N2.17tn to N2.07tn.
The decline continued in the second quarter of this year with credit dropping further from N2.07tn as at the end of March to N2.01tn.
The decline in credit to manufacturers may not be in line with the Federal Government’s objective for the sector as contained in its Economic Recovery and Growth Plan.
The plan stipulated that the government would pursue manufacturing promotion policies that would enable the sector to record an average annual growth rate of 8.48 per cent between 2018 and 2020.
This is expected to rise from -5.8 per cent in 2017 to 10.6 per cent by 2020.
The ERGP was expected to build on the Nigeria Industrial Revolution Plan, to address the key challenges in manufacturing.
Some of these challenges are limited access to credit and financial services; poor infrastructure and unreliable power supply that forces businesses to rely on generators, thus increasing their input costs and reducing their overall competitiveness and profitability.
Speaking on the credit to the manufacturing sector, the Regional Director, United Nations Industrial Development Organisation, Jean Bakole, called on the DMBs to provide more funding support to entrepreneurs in the country.
Bakole said that for the country to harness the potential of the real sector, there was a need for financial institutions to address some of the impediments to funding the sector.
For instance, he identified the issue of collateral requirements by banks before loans could be offered to customers as a major limiting factor to growing the sector.
He said, “There is no doubt that Nigeria’s SME sector is the largest employer of labour in the country today. However, there is a major challenge that should be at the back of our minds. This relates to how to formalise and grow the large micro enterprises estimated to be over 37 million enterprises in 2013, according to SMEDAN/NBS survey of the Small and Medium Enterprises.
“The financial institutions should think of ways to support these trained entrepreneurs to start up or expand their businesses, especially those who are able to develop a bankable business plan.
“Particular attention should be paid to the issue of collateral for youth and women to enable them to access finance for start-ups or expansion of their businesses.”
Bakole said that entrepreneurship was a necessary ingredient for stimulating economic growth and employment opportunities in every society.
This, he noted, was imperative considering the fact that successful small businesses were the major driver of job creation, income growth and poverty reduction.
Also, a former Director-General, Abuja Chamber of Commerce and Industry, Dr Chijioke Ekechukwu, said that the government needed to step up its diversification agenda with credit policy for manufacturers.
He said while the government had been pursuing the economic diversification since the inception of this administration, the results had not been too impressive based on recent GDP report released by the NBS.
Apart from agriculture, particularly crop production, he said oil was still the leader in terms of income to Nigeria.
To simulate the economy, Ekechukwu said there was a need for more reforms to further reduce the cost of doing business and interest rate.
Ekechukwu said, “The country came out of recession as a result of an improved production capacity and improved international oil prices. These two major reasons are actually out of the control of the government and so achieving that feat cannot be said to be a better plus because if that situation had not happened, it is possible that we won’t have been out of recession.
“In the area of growing the non-oil sector, we are yet to make any significant effort that could take the country to the path of sustainable growth.
“The non-oil sector on its own has the capability to drive the economy in case the price of oil that is not within our control starts declining. So, there is a need to put in more efforts in agricultural development, boosting the export market and the manufacturing sector.”