Agriculture and manufacturing sectors that are strategic to Nigeria’s economic revival received less attention from Zenith Bank, one of the biggest banks in the country, as loans and advances granted to businesses in these sectors fell at half year 2023.
By regional distribution of loans, the South East geopolitical zone was the worst hit in terms of the decline in loans and advances, followed by the North West and North East.
The decline in loans to the agricultural and manufacturing sectors came at a time of subdued growth in the two sectors and also coinciding with when the federal government declared an emergency on food security.
Real GDP growth rate in the agriculture sector fell by 0.9 percent in Q1 2023 but returned to positive growth of 1.5 percent in the second quarter. For the manufacturing sector, real growth was 1.61 percent in Q1 and 2.20 percent in Q2 2023.
Total Zenith Bank’s half-year loans and advances after impairment rose by 25.9 percent to N5.05 trillion as of June 2023 from N4.01 trillion as of June 2022. This is as the bank recorded a threefold growth in its profit after tax which stood at N291.73 billion by June 2023 as against N111.41 billion as of June 2022.
Loans and advances increased to South West, North Central, South-South as well as outside of Africa while those to South East, North West, North East, and the rest of Africa declined, the analysis of Zenith Bank’s half year 2023 results has shown.
Loan distribution to businesses and households in the South West geopolitical zone increased by 29.9 percent to N3.96 trillion as of June 2023 compared to N3.04 trillion at half year 2022.
Businesses and households in the North Central region received more priority from Zenith Bank with the total loans and advances granted to the region increasing by 12.1 percent to N162.37 billion, up from N144.87 billion during the same period in 2022.
Among the geopolitical zones in Nigeria with positive loan distribution growth, the South-South region received the least attention, as loans and advances rose by just 6.66 percent at half year 2023 to N290.30 billion, up from N272.17 billion as of June 2022.
Loan distribution through Zenith Bank’s subsidiaries outside of Africa rose by 114.9 percent to N224.38 billion at half year 2023 as against N104.44 billion that the bank granted to businesses and households in the same region as of half year 2022.
The increase in loans and advances to the above-mentioned regions may not be unconnected with the strategy the bank put in place at the end of the first quarter of this year for gaining market share as well as attracting and utilising deposits from customers.
Zenith Bank said at the end of Q1 2023 that it would “compete aggressively for market share while focusing on high quality assets and adopting cost reduction strategies”, adding that it would also attract “cost effective deposits from the retail end of the market for deployment in the corporate segment with emphasis on emerging sectors”.
With the highest decline in loans and advances occurring particularly in the South East and North West, this could be interpreted to mean that those regions lacked the types of assets that would warrant the bank to increase loans and advances to the regions.
Loans and advances to the South East subregion fell by 13.7 percent to N134.9 billion in June 2023 from N156.2 billion in the corresponding period of 2022. The North West region was not different as loans and advances declined by 9.5 percent to N47.9 billion in June 2023 as against N52.9 billion as of June 2022.
The decline in North East’s loans and advances was 2.8 percent to N107.3 billon, from N110.4 billion as at half year 2022, while loans and advances to the rest of Africa fell by 0.6 percent to N127.7 billion at half year 2023 compared to N128.5 billion as of June 2022.
By economic sectors, the nation’s communications sector received the highest priority from Zenith Bank during the first six months of this year, and this mirrors the spectacular growth rate in the country’s information and communication sector.
According to the National Bureau of Statistics (NBS), the real GDP growth rate in the sector was 10.3 percent and 9.7 percent at the end of the first and second quarters of 2023 whereas the overall economy grew by 2.31 percent and 2.51 percent, respectively, during the same quarters.
Zenith Bank’s loans and advances to businesses in the communications sector rose by threefold to N100.5 billion at half year 2023, up from N25.9 billion in the corresponding quarters of 2022. The oil and gas was second in priority, recording 81.6 percent growth in loans and advances to N1.58 trillion, up from N871.7 billion in the corresponding quarter in the previous year.
Loans and advances to general commerce rose by 62.9 percent; finance and insurance, N61.2 percent; consumer credit, 38 percent; agriculture, 31 percent; real estate and construction, 8.2 percent; power, 3.7 percent, and education, 2.8 percent.
Loans and advances to the government fell by 8.2 percent while advances to the transportation and manufacturing sector declined by 12.4 percent and 18.8 percent, respectively.