How Nigerian banks support manufacturing sector
Manufacturing is the fulcrum of any economy and determines, to a large extent, a country’s capacity and seriousness to diversify and create jobs.
China’s success story of emancipation today came through manufacturing, which took the centre-stage of its economic policies in the last three to four decades. The result is tremendous job and wealth creation, with significant proportion of its population lifted above the poverty line, and an emergence of a strong middle-class, which has become a formidable consuming ‘army’.
Apart from manufacturing being the productive base of the economy, it creates multiplier effects owing to its backward integration potentials.
For Nigeria, manufacturing has always been important in the scheme of economic development, starting from the early 1960s when the first national development was launched, with the sector growing to contribute about 6.8 percent to the Gross Domestic Product (GDP).
According to Biodun Adedipe, chief consultant at B. Adedipe Associates Limited, the sector has gone through cycles of boom and bust in the last four and half decades because of policy inconsistency, expressed in either of unclear direction or lack of commitment to the direction articulated.
The sector has made increasing contribution to the GDP, rising from an annual average of 4.08 percent during 2006-2010 to 7.48 percent in 2011-2015, Adedipe said.
The trend of lending to manufacturing in Nigeria over the period 1981 to 2013 reveals that relative credit allocation to manufacturing has reduced significantly. For the longer period of 2001 to 2014 though, data show a weak negative correlation statistically (-16.42 percent). However, economic growth averaged 6.16 percent over 2001 to 2015, while credit allocation to manufacturing averaged 16.45 percent over 2001 to 2014, Adedipe said in a presentation entitled, ‘Nigerian Manufacturing and the Role of Financial Intermediaries’.
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There is, however, an interesting observation in the relationship between manufacturing growth and unemployment. Using the quarterly unemployment data for 2013 to 2015 (using the new rates produced by the National Bureau of Statistics), Adedipe found a negative correlation of 44.26 percent, showing that growing manufacturing can curb unemployment
“It is important, therefore, that the renewed attention to manufacturing by the present government demands channelling more resources (especially credit) to the sector and active support from the private sector,” Adedipe counselled.
Skye Bank plc has demonstrated a commitment to manufacturing, particularly in the last six years. The bank has granted increasing proportion of its total credit outstanding to its manufacturing customers since 2009. The bank has lent about N3.3 trillion to this critical sector within the period.
Over the last five years, some other banks have also contributed substantially to the growth of the manufacturing sector, and by implication, the national economy, to propel the country’s growth and competitiveness in the global arena. For instance, during the five-year period 2009 and 2013, First Bank’s loans and advances to the customers, including the manufacturing sector amounted to N4 trillion, just as UBA’s contribution between 2014 and 2015 was over N1 trillion, Adedipe disclosed.
Skye Bank particularly has supported the agricultural value chain, which has translated into job creation.
According to Timothy Oguntayo, group managing director/CEO of Skye Bank plc, the bank’s agricultural portfolio has hit ten percent, from five per cent two year ago.
The Skye Bank CEO, who spoke with select journalists on the sidelines of 3rd Ogun State Investors’ Forum held in Abeokuta, the Ogun State capital, said the bank was supporting agriculture in nine states under the pilot scheme with focus on rice and cassava production.
“We have brought in international participants – those who have done it successfully in other parts of the world – to come and work with clusters of farmers; a group of farmers we have in Ogun State here, we have in Osun State, we have in the northern states.”
Oguntayo added that the bank was partnering with the state in line with its retail focus on developing SMEs through agricultural financing, in line with the import substitution strategy of the Federal Government of President Mohammadu Buhari.
ODINAKA ANUDU