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Agric Sector not Supported by Banks- RenCap

By on October 22, 2012

Yvonne Ike, CEO, Rencap Nigeria

 

The Agric sector is suffering primarily because banks are not being deployed to support the real sector of the economy, says Renaissance Capital (RenCap).

 

Based on a RenCap report, major contributors in terms of lending to the Agric sector are the manufacturing, telecoms, and general commerce sectors, the banks are the least contributors to the sector. The report added, agriculture accounts for only one to five per cent of credit, yet it accounts for 40 per cent of Nigeria’s Gross Domestic Product (GDP).

 

In the report tagged. “Nigerian banks – Loan books under the spotlight,” stressed that bank’s balance sheets bear little resemblance to the real economy.

 

It said absorption risk remains elevated, even though there are material dissimilarities among the banks. “We measure concentration as the weighting of the top four sectors in the total loan book. On this score, Zenith Bank has the lowest concentration, while Access Bank has the highest,” it added.

 

According to the report, the Asset Management Corporation of Nigeria (AMCON) has raised concerns over the fall of non-performing loans (NPL) ratios, saying current trend of below-average destruction charges could continue all through 2013.

 

This, it said, will improve earnings and returns significantly above their long-term averages in the short run, adding that the impairment charges may begin to be normal in 2014.

 

RenCap concluded by assessing that, Access Bank has been a current dawdler in terms of stock performance, but still placed a buy rating on the rating and placed buy on Zenith Bank, GTBank while Skye Bank is the  a preferred stock, it said.