As the 2019 General elections draw near in Nigeria, some commercial banks plan to cut lending to avert risks, Ike Chioke, Managing Director, Afrinvest West Africa Limited, has said.
Chioke made the disclosure while releasing the 2018 Nigerian Banking Sector Report in Lagos on Tuesday.
The development is coming in spite of the promise by the Central Bank of Nigeria (CBN) to support banks that fund projects in the agriculture, manufacturing, and other related sectors that are employment and growth stimulating to the economy by refunding Cash Reserve Ratio (CRR) at a single interest rate of 9 percent per annum.
The CBN had said the effort under the differentiated CRR regime was part of measures aimed at increasing the flow of credit to the real sector of the economy in order to consolidate and sustain the nation’s economic recovery
But according to the Managing Director of a Lagos-based investment and research firm, lenders are already cutting loans to key sectors of the economy to reduce the political risks and ensure safety of their funds.
“The political environment is heating up, new alliances are emerging and defections across the biggest parties have punctuated the polity.
“These events are evidence of the prevailing political risk factor in Nigeria, creating uncertainty in the environment, with potential impacts on business and investor confidence,” Chioke said.
He added that the election fears have contributed to the decline in the Foreign Direct Investment (FDI) inflow into the country as some of the investors are caution against the polls.
The Managing Director forecast that with the expected recovery in the non-sector which reflected in the nation’s Q2 Gross Domestic Product (GDP) report, Nigeria’s economy would reach 2.1 percent in 2018.
His outlook is 0.5 percent points from 2.6 percent earlier projected for the nation’s growth.
“To achieve this, we believe that increased spending ahead of the 2019 elections will support non-oil sector activities, while increased oil output due to an additional 0.2 million barrels per day from the Egina Oil Field will drive oil sector growth,” he said.
In August, a $3.3 billion worth Egina Floating Production, Storage and Offloading (FPSO) had sailed from LADOL Island in Lagos to its oil field located in Oil Mining Lease (OML) 130 located some 130 kilometers off the coast of Nigeria at water depths of over 1,500 meters.
The oil field was projected raise Nigeria’s crude oil production by 200,000 barrels per day, an approximate of 10 percent of the country’s total oil production output, when it comes on stream in December.
The project, built by Samsung Heavy Industries of Korea (SHI) for the Egina oil field was primarily operated in Nigeria by the global oil giant, Total, at a cost of $16 billion.
Source: The Ripples
The Nigeria’s inflation rate has rebounded in August for the first time since January 2017 after recording 18 consecutive months of downward trend, according to the National Bureau of Statistics (NBS).
In the August inflation report by the statistics bureau on Friday, the nation’s Consumer Price Index (CPI), which measures inflation, rose by 0.09 percent points to 11.23 percent in August.
This implies the prices of goods and services rose at a faster rate in review month – just like June 2018 – when compared with July 2018.
The headline inflation had been on steady decline from 18.72 percent since January 2017 to 11.14 percent in July 2018, this was after it fell to 18.55 percent in December 2016.
In spite of the persistent decline during the period, the macroeconomic variable remained above the Central Bank of Nigeria’s (CBN) acceptable band of 6 percent to 9 percent.
The CPI measures the composite changes in the prices of consumer goods and services, such as food, transportation, and medical care, purchased by households, over a period.
The NBS said food inflation also surged to 13.16 percent YoY in August up from 12.85 percent recorded in previous month, while core inflation, which excludes agricultural produce, dropped from 10.2 percent in July to 10.0 percent in August.
The CBN had expressed fear over the possibility of a rebound in the macroeconomic indicator in the second half of 2018 as a result of increased spending ahead of the 2019 general elections.
In August, the CBN said it may consider raising its key lending rate for the first time in two years if the inflation rate worsens.
The Monetary Policy Committee (MPC) of the CBN in its July meeting had retained the Monetary Policy Rate (MPR) at record-high of 14 percent for the 11th consecutive time since 2016 to monitor the magnitude of the liquidity impact of the fiscal injection and election related expenditure.