Recession, tumbling oil prices deterring Nigerian banks from lending: Report

*Report indicates that a slump in oil prices and the second annual contraction in the Nigerian economy in four years are weighing on consumer demand even after two interest-rate cuts in 2020

*Stanbic IBTC Pension Managers aims to invest in infrastructure so as to enhance indigenous industries to boost production and help to reduce demand for Dollars

Isola Moses | ConsumerConnect

Lending is slowing in Nigeria, as the battered national economy dents consumer demand in recent times.

And this has been attributed to a recession and tumbling oil prices deterring Nigerian banks from lending to consumers, according to reports.

Nigeria’s private-sector credit growth slowed in November to the lowest level since April, when the measure shrank by a record 61 percent, a Bloomberg report said.

It was learnt that a slump in oil prices and the second annual contraction in Africa’s biggest economy in four years are weighing on demand even after two interest-rate cuts in 2020.

Report stated the banks are reluctant to extend credit, fearing non-performing loans (NPLs) would increase after restructuring piles of debt owed by their customers.

In a related development, one of the leading Nigerian pension fund managers has plan to help in boosting the value of the Naira.

As the Stanbic IBTC Pension Managers aims to invest in infrastructure, thereby enhancing indigenous industries to boost production could help to reduce demand for Dollars, according to report.

Faced with bond yields coming off record lows and a hard-to-trade equity market, Nigeria’s biggest pension-fund manager wants the flexibility to invest directly in large local projects.

Eric Fajemisin, Chief Executive Officer (CEO) of Stanbic IBTC Pension Managers Limited, was quoted to have said that financing the development of domestic industries with Naira would also ease pressure on the nation’s currency by reducing demand for US Dollars.

Fajemisin, in an interview in Lagos, stated once up and running, local plants in the country can help cut imports, further benefitting the Naira and easing pressure on inflation that’s been decimating returns in investments.

According to him, domestic retirement funds overseeing the equivalent of $30 billion are looking for new places to invest.

That’s after yields on government debt that account for the bulk of their investments plunged because too much cash flooded into the system.

The lack of enough high quality stocks, few options by way of derivative products and small corporate debt issuance limit alternatives for investors trapped in a recession.

The Stanbic IBTC Pension CEO said: “We’re looking at investing in real estate and infrastructure that has economic benefits like transportation, healthcare and telecommunications.

“These opportunities must be commercially viable on their own and possess the potential to improve the level of employment.”

Meanwhile, it was gathered that despite being Africa’s biggest oil producer, Nigeria imports almost all of its fuel, machinery, pharmaceuticals and cereals due to poorly kept transport networks and electricity shortages that make local production inefficient and expensive.

While pension funds can invest in development projects, they need to do so through dedicated infrastructure funds, report said.

Fajemisin noted that the nation’s regulator has so far reacted positively to recommendations from the Pension Fund Operators’ Association of Nigeria that retirement funds be able to finance infrastructure directly, having allowed some co-investments.

The Central Bank of Nigeria (CBN) has devalued the Naira three times this year, thereby prompting inflation that’s been fanned by higher food prices in the country’s markets.

Fajemisin added: “Considering the economic environment and its impact on businesses, the industry may experience a period of net negative cash flows if businesses continue to struggle and can’t meet their contributions,” adding, that  any increases in its allocation to equities will be done over time and cautiously.