…Loans to five sectors drop 17.5% to N16.43trn in 6 months
By Babajide Komolafe
At the backdrop of the challenges confronting the manufacturing sector, including structural bottlenecks, weak consumer demand and high interest rates, banks slashed loans to manufacturers and traders by N2.1 trillion in the first six months of 2025 to N10.946 trillion at the end of June, representing a 16.2 per cent decline from N13.065 trillion at the end of 2024.
Vanguard analysis of data on banks’ loans to different sectors of the economy also revealed declines in loans to the Real Estate and Education sectors.
According to the CBN, banks slashed loans to the manufacturing sector by 16.8 per cent or N1.437 trillion to N7.091 trillion at the end of June 2025 from N8.528 trillion at the end of December 2024.
Similarly banks reduced loans to the Trade/General Commerce sector by 15 per cent or N682 billion to N3.855 trillion at the end of June from N4.536 trillion at the end of December 2024.
Loan to the Education sector was also reduced by 11 per cent or N9.8 billion to N79.43 billion at the end of June 2025 from N89.25 billion at the end of December 2024.
The Real Estate sector also recorded a 5.5 per cent or N53 billiotopn decline in bank loans to N904.15 billion at the end of June 2025 from N957.38 billion at the end of December 2024
Banks also slashed loans to sundry activities, categorised under ‘General’ by 22 per cent or N1.29 trillion to N4.03 trillion at the end of June 2025 from N5.80 trillion at the end of December 2024.
Consequently, banks’ loans to the manufacturing sector, trade and the other three sectors fell by 17.5 per cent or N3.48 trillion to N16.432 trillion at the end of June 2025 from N19.909 trillion at the end of December 2024.
As a result of the decline in loans to the five sectors, total bank credit to the private sector fell by 17.8 per cent or N1.057 trillion to N58.159 trillion at the end of June 2025 from N59.216 trillion at the end of December 2024.
Further analysis also showed that the share of the five sectors in total banks’ loan to the private sector dropped to 28.3 per cent at the end of June 2025 from 33.6 per cent at the end of December 2024.
Analysts at FBNQuest Merchant Bank had identified limited access to affordable bank loans as one the factors responsible for the low growth of the Manufacturing sector, which averaged 1.29 per cent in in five quarters to Q1’25.
In a report titled, ‘The State of The Manufacturing Sector,’ FBNQuest analysts, said: “Nigeria’s manufacturing sector has consistently underperformed despite the potential of the sector to drive economic diversification, create employment, and stimulate industrial development.
“This disappointing outturn can be attributed to persistent structural challenges, including unreliable power supply, inadequate infrastructure, limited access to affordable finance, and regulatory bottlenecks. “Compounding these longstanding issues are elevated market interest rates, which have intensified cost pressures and heightened operational uncertainties for manufacturers, further constraining the sector’s growth.
“In addition, the significant reduction of consumer purchasing power—driven by rising inflationary pressures—has weakened domestic demand for locally produced goods, further exacerbating the overall challenges confronting the manufacturing sector.
“Consequently, the sector’s output growth has remained subdued in recent years, with manufacturing GDP expanding by a modest 1.69 per cnet year-on-year, YoY in Q1 ’25.
“The sector has averaged a growth rate of just 1.29% over the past five quarters, reflecting its continued struggle to overcome structural and macroeconomic headwinds.
“Although the manufacturing sector was among the leading contributors to VAT revenue in Q4 ‘24, foreign direct investment (FDI) into the sector has declined significantly, reflecting waning investor confidence.
“In Q1 ‘25, Foreign Domestic Investment, FDI inflows into the sector plummeted to just $129.2 million, a sharp decline from $421 million recorded in the previous quarter.
“This marks the lowest quarterly inflow since Q2 2022, when the sector attracted a mere $98.2 million.
The steep drop in investment reflects growing investor apprehension amid persistent structural challenges, macroeconomic instability, and policy uncertainty—further undermining the growth of the sector.”
Consequently, the analyst averred that, while the manufacturing sector holds strong potential to become a significant driver of Nigeria’s industrialisation agenda, realising this potential will require deliberate and sustained efforts to address entrenched structural deficiencies, as well as prevailing macroeconomic pressures.”
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