Bank lending to other  financial institutions and the insurance sector make up an average of 26 percent of all bank lending in Nigeria. A sectoral analysis of bank lending portfolio  contained in the Financial Transparency Report, published jointly by BusinessDay and Source Capital Financial Research, shows that this form of lending made up the highest proportion of loans by banks in the country.

The report shows that of the total loans portfolio of N6 trillion for the 14 banks, N1.62 trillion represented this form of loans which comprised mainly inter bank lending and other forms of lending to other banks and insurance firms.

Loans to the oil and gas sector ranked a distant second with 12.89 percent or N787 billion of gross lending of the 14 banks in 2009. Loans for general commerce ranked third with 10.83 percent or N661 billion, while manufacturing came a close fourth attracting N617 billion or 10.11 percent of bank lending in 2009. Agriculture attracted the least lending from the analysed banks in 2009, attracting less than one percent of banks’ total lending portfolio.

Lending to the capital market represented just 3.94 percent of banks total lending portfolio while telecommunications attracted 7.12 percent. Real estate construction, including mortgages, attracted 7.5 percent of banks’ gross lending in 2009.

Analysis of individual bank’s lending to the manufacturing sector showed that Zenith Bank had the highest proportion (16% or N177 billion) of its loan portfolio classified as lending to manufacturers. Stanbic IBTC followed closely with 15.9 percent or N41 billion of its gross loan portfolio classified as lending to manufacturers. Skye Bank had the least, just 1.24 percent of its loan portfolio classified as lending to manufacturers.

Analysis of bank lending to the agricultural sector showed that Diamond Bank had the highest proportion (3.87 percent or N13.42 billion of a total loan portfolio of N346 billion) of its loan portfolio classified as lending to agriculture. Ecobank had the least exposure to the agricultural sector. Most banks lent less than one percent of their gross loan portfolio to the agricultural sector.

The Financial Transparency Report 2010 covers in-depth analysis of Nigeria’s 14 healthy banks, including a comprehensive ranking of their corporate governance and risk management reports in their published annual reports.

FG Rolls Out Guidelines For Public Borrowing

The Nigerian government authority has rolled out guidelines and controls for public borrowing in the country not exceeding the existing 25 per cent ceiling of the gross domestic product (GDP). 
This could be government’s reaction to its growing local and international debt profile. The Federal government owes local creditors N3.7 trillion and has a foreign debt of $4.3 billion. The World Bank and many Nigerians have expressed concern over the growing debts in recent time.

In a document prepared by the federal ministry of finance and the debt management office (DMO) and presented to council, intending borrowers, be it federal or state, must “identify project(s) and submit documents of projects to be funded with the loan, in line with national development priorities and creditor’s country partnership strategies”.
One of the requirements in the document specifies that “any government or its agencies can only obtain external loan through the Federal Government and such loan must be supported by Federal Government’s guarantee. No state, local government or federal agency shall, on its own borrow externally”.

The document, which was explained to State House correspondents by Olusegun Aganga, minister of finance, further indicated that “state governments and their agencies wishing to obtain external loans shall obtain Federal Government’s approval-in-principles, from the Federal ministry of finance.”

The new guideline requires that the “executive council of the state wishing to contract external loan must approve the loan proposal which must be followed by a resolution of the state house of assembly”.

“All external borrowing proposals of the governments and their agencies for the next fiscal year must be submitted not later than 180 days preceding that year to the ministry of finance for incorporation into the public sector external borrowing programme for the coming year. Going forward, this requirement and other guidelines will be strictly adhered to,” the document further stated.

Any borrowing, the guidelines further showed, must be submitted to the federal ministry of finance and the DMO for consideration.
On the internal borrowing front, the guidelines stipulate that “any internal loan to be raised from the capital market must conform to the requirements of the Investments and Securities Act (ISA), 2007”.

It added further: “All applicants to raise funds from the capital market shall, amongst other documents, be accompanied by an original copy of an Irrevocable Standing Payment Order (ISPO)”.
The ISPO so issued must be forwarded to the minister of finance for approval.

On the part of the banks lending the money internally, the guidelines require that “all banks and financial institutions requiring to lend money to the federal, state and local government shall obtain the prior approval of the minister of finance and shall state the purpose of borrowing and the tenor”.