Banks remain reluctant to lend out depositors’ money

DESPITE calls on commercial banks by the Central Bank of Nigeria (CBN) to increase lending to farmers, companies and business owners, evidence has emerged that the lenders are reluctant to do so.

By retaining the ratio of individual bank loans to deposits at a maximum of 80.00 per cent in 2018 and 2019, the CBN had expected lenders to at least lend out up to 70 per cent of their deposits, but only a few of them struggled to attain 60 per cent.

Nigerian Tribune analysis of their 2018 audited annual accounts  show that apart from  Zenith Bank which lent out 67.7 per cent of its depositors funds with total loans and advances at N2.497 trillion, others kept their Loans to Deposit Ratios (LDR) at  60 per cent and below.

For instance, with Loans and advances at N1.731 trillion, United Bank for Africa (UBA) maintained its LDR  at 49.1 per cent while Access Bank before merger guided its loan to deposits ratio at 60 per cent despite recording total Loans and advances of N2.136 trillion in 2018.

With total Loans and advances at N1.262 trillion, Guaranty Trust Bank (GTB) was careful as it gave out a little above average of depositors money, keeping its LDR at 53.5 per cent in 2018 financial year.

For Stanbic IBTC Bank, with total Loans and advances of N441.3 billion, its LDR remained at 45.6 per cent in 2018 away from CBN’s 80 per cent maximum, reflecting a more careful approach to playing intermediation role with its depositors’ money.

However, finance experts and stakeholders in the banking industry rightly believe that Financial intermediation is about ensuring the flow of financial resources from the surplus segments of the economy to the deficit sectors. But this is not the case in the Nigerian economy as banks rather preferred to lend to the government which ordinarily could be classified as belonging to the surplus segment.

Further analysis of their 2018 annual reports and accounts show that four top Nigerian banks are cumulatively holding Federal Government’s 2018 debt instruments valued at N4.4 trillion.

The foremost lenders are Zenith Bank Plc, United Bank for Africa (UBA) Plc, GTBank Plc and the old Access Bank Plc.

This implies that in 2018, government borrowed a whopping N4.4 trillion from the leading lenders in the form of investments in fixed income instruments including Federal Government (FGN) Bonds and Treasury Bills.

In previous year 2017, the same banks had loaned to the Federal Government, a total of N3.43 trillion, indicating that the government’s borrowing from the banks rose by 28.04 per cent in 2018.

Figures obtained from the financial statements of the banks indicated that UBA invested the largest amount of N1.64 trillion in treasury bills and bonds in 2018, representing 34.63 per cent higher than the N1.22 trillion it reported for the same purpose in the previous year.

• ‘Why UBA has invested $5bn in Africa in 7 yrs’

Zenith Bank which reported N1.22 trillion investment securities in year 2017, increased its holding by 23.51 percent to N1.57 trillion in 2018.

GTBank also reported a 3.1 percent increase in its investments in treasury bills and bonds to N694.1 billion in 2018, up from N672.9 billion it had reported in 2017.

Similarly, Access Bank’s investments in treasury bills and bonds in 2018 jumped 80.13 percent to N501.07 billion, up from N278.17 billion the lender had reported in previous year 2017.

Attracted by high yields in government securities, deposit money banks have been investing heavily in government securities after non-performing loans hit disturbingly record levels in 2015, necessitating banks to start cutting credit to individuals and corporates.

The Director General of the Lagos Chamber of Commerce (LCCI) Muda Yusuf recently stated that, “A significant portion of credits to the economy is still going to the government, the large enterprises and the oil sector which have very weak leakages within the economy. These are fundamental monetary policy challenges that need to be addressed.”

The Monetary Policy Committee of the CBN on two weeks ago reduced the Monetary Policy Rate, also known as the benchmark or main interest rate, from 14 per cent to 13.5 per cent.

The MPR, which is used to determine bank lending rates and the cost of credit for borrowers, had been held at a record high of 14 per cent since July 2016, when it was hiked by 200 basis points from 12 per cent.