Financial access and inclusion in Nigeria witnessed a not-too-impressive progress in the first three months of this year as loans and advances to customers as of March 2023 recorded just 3.3 percent growth to N28.5 trillion, up from N27.6 trillion during a similar period in 2022. The increase effectively put the new loans and advances granted to customers at N904.76 billion during the first quarter of this year.
The Nigerian Observer analysed the first quarter unaudited financial reports of 11 commercial banks in the country, comprising five tier-one and six tier-two banks. The five tier-one banks are Access, First Bank Holdings, Guaranty Holdings, United Bank of Africa (UBA), and Zenith Bank. The tier-two banks are FCMB, Fidelity, Unity Bank, Stanbic IBTC, Ecobank, and Wema. The tier-one banks accounted for the bulk of the increase in loans and advances during the period.
This is as the same banks increased deposits from customers by 9 percent to N57.05 trillion at the end of the first quarter of 2023, compared to N52.34 trillion as of March 2022.
The Nigerian economy witnessed persistent hikes in the benchmark interest rate from the beginning of the second quarter of 2022, which was a policy response to the rising inflation amidst cash crunch caused by the naira redesign policy implemented by the Central Bank of Nigeria. Commercial banks in the country consequently adjusted their lending rates to individuals and corporate customers accordingly, making loans unaffordable to individuals and small businesses.
The 11 deposit money banks granted N904.76 billion new loans during the first quarter with the bulk of the new loans coming from Zenith Bank and Fidelity Bank.
Zenith Bank granted N477.23 billion new loans representing 53 percent of the new loans granted by the 11 deposit money banks under coverage. With N335.45 billion, Fidelity Bank ranked second by volume of new loans and advances granted to customers, representing 37 percent of the new loans during the quarter.
UBA granted N164.31 billion new loans and advances, while FBN Holdings was responsible for N160.17 billion new loans during the first quarter of 2023. Wema Bank granted just N2.47 billion new loans and advances.
On the other hand, deposit money banks such as Access Bank, Guaranty Trust Holding, FCMB, Stanbic IBTC and Ecobank saw their loans and advances reduce during the quarter. The reduction in their loans and advances ranged from 0.1 percent to 0.6 percent during the quarter.
For the industry, the 11 deposit money banks recorded a loan-to-deposit ratio of 48.4 percent during the first quarter of 2023 as against 52.7 percent in the corresponding quarter of 2022. This means that out of each N1,000 deposit received by banks in Q1 2023, they gave out N484 as loans, whereas in the similar period in 2022, the same set of banks gave out N527 as loans for each N1,000.
However, this varied according to banks. Zenith Bank’s loan-to-deposit ratio for Q1 2023 stood at 38.9 percent compared to 49 percent in Q1 2022. UBA’s loan-to-deposit ratio was 36.3 percent in Q1 2023 as against 40.1 percent in Q1 2022. For FBN Holdings, the loan-to-deposit ratio was 49.9 percent as against 53.2 percent during the comparable period.
It was 68.5 percent for Fidelity Bank compared to 88.4 percent in Q1 2022; 59.7 percent for FCMB versus 61.5 percent in the comparable period; 90.9 percent for Stanbic IBTC as against 96.7 percent in the comparable period, while it was 89 percent for Unity Bank compared to 79.6 percent in similar period in 2022.
According to Enhancing Financial Innovation and Access (EFInA), in 2022, Nigeria was one of the countries in Africa with the higher proportion of financially excluded adults, just as the body suggested that deposit money banks must devise means to remove obstacles to access and institutional exclusion.
