A Dataphyte review of the full-year 2022 financial statement published by the United Bank for Africa (UBA) PLC shows that the financial institution prioritised manufacturing, general commerce, and governments for loan disbursements in the financial year.
The UBA disbursed N229 billion as loans to the manufacturing sector, but the agricultural sector got only N67 billion. The finance and insurance sector’s loan stood at N182 billion.
The N67 billion disbursed to players in the agriculture sector in the 2022 financial year was a 43 percent increase from N47 billion disbursed to the sector in the 2021 financial year.
However, the N67 billion was still insignificant when compared with N370 billion lent to the general sector, N229 billion to manufacturing, N264 billion to general commerce, N232 billion to governments, among others.
Agriculture has been a shining light in the Nigerian economy, contributing 25.58 percent to the gross domestic product in 2022, according to the National Bureau of Statistics (NBS). The sector contributed 26.46 percent to overall GDP in real terms in the fourth quarter of 2022,
The oil and gas sector recorded a fall in loans from N255 billion in 2021 to N139 billion in the 2022 financial year.
The bank’s loan to the manufacturing sector dropped from N351 billion in 2021 to N229 billion in 2022.
But government loans increased from N185 billion in 2021 to N232 billion in 2022. Finance and Insurance sector loans also grew from N156 billion to N182 billion.
Oil, gas sector leads in non-performing loans
In UBA’s books, the oil and gas sector accounted for 20 percent of non-performing loans.
A loan becomes non-performing when the borrower fails to pay the agreed interest or installments at the stipulated time.
The bank did not name the organisations in the oil and gas sector that specifically got these loans and failed to fulfill their obligations.
The oil and gas sector has been hit by oil price fluctuations, foreign exchange crisis, petrol price cap and high logistics costs.
Profit, revenue Increase
The UBA Nigeria posted revenue of N543.748 billion for the 2022 financial year, recording a profit before tax of N134.119 billion and a profit after tax of N124.064 billion.
The revenue posted in 2022 was an increase of 45.9 percent from the N372.779 billion recorded in 2021. The organisation’s profit also increased from what was posted in 2021. In 2021, profit before tax stood at N57.277 billion, meaning that the profit before tax published in 2022 represented a 135 percent rise over the 2021 figure. Profit after tax also improved by 138 percent between 2022 and 2021, as the organisation posted N52 billion in 2021.
UBA’s support to farmers
The UBA won the Lagos Chamber of Commerce and Industry (LCCI) award as the largest lender to agriculture in 2015. It is also participating in the Federal Government’s intervention funds such as AGSMEIS loan scheme. But there are questions as to whether the bank’s support to farmers is significant.
Why bank loans to critical sectors are important -Expert
The Director of Business and Commercial Services at Kaduna Capital Territory Development Authority, John A’aron, highlighted issues of credit ratings in different sectors as some of the considerations by banks in loan disbursements.
“As a business, a bank may prioritise some sectors over others due to their ability to fulfil loan obligations. However, this may affect some sectors and even regions over others due to different strengths on business concentration. In some parts of the country, agro-allied businesses are more prevalent than oil and gas or manufacturing sector,” he said.
A’aron also noted that some sectors with smaller percentages of loans were mostly occupied by micro, small, and medium enterprises (MSMEs), which normally had low credit ratings.
“Some sectors have higher prevalence of MSMEs, and they do not have access to finance because they are seen as having lower credit ratings. This development, however, needs tackling because MSMEs account for most jobs in the country. So, we need to be able to identify how to help them access finance,” he stated.
John further identified lobbying banks and financial institutions as a way to ensure better financing for sectors, especially those that are largely MSMEs.
He also noted that the government could intervene through, providing incentives, tax breaks, promotions, and innovative solutions, noting that Kaduna is readily deploying these mechanisms to tackle issues of access to funding and development of critical sectors in the state.