2019 ELECTIONS: Banks to reduce lending over rising political risks

Oct 17, 2018

As the 2019 General elections draw near in Nigeria, some commercial banks plan to cut lending to avert risks, Ike Chioke, Managing Director, Afrinvest West Africa Limited, has said.

Chioke made the disclosure while releasing the 2018 Nigerian Banking Sector Report in Lagos on Tuesday.

The development is coming in spite of the promise by the Central Bank of Nigeria (CBN) to support banks that fund projects in the agriculture, manufacturing, and other related sectors that are employment and growth stimulating to the economy by refunding Cash Reserve Ratio (CRR) at a single interest rate of 9 percent per annum.

The CBN had said the effort under the differentiated CRR regime was part of measures aimed at increasing the flow of credit to the real sector of the economy in order to consolidate and sustain the nation’s economic recovery

But according to the Managing Director of a Lagos-based investment and research firm, lenders are already cutting loans to key sectors of the economy to reduce the political risks and ensure safety of their funds.

“The political environment is heating up, new alliances are emerging and defections across the biggest parties have punctuated the polity.

“These events are evidence of the prevailing political risk factor in Nigeria, creating uncertainty in the environment, with potential impacts on business and investor confidence,” Chioke said.

He added that the election fears have contributed to the decline in the Foreign Direct Investment (FDI) inflow into the country as some of the investors are caution against the polls.

The Managing Director forecast that with the expected recovery in the non-sector which reflected in the nation’s Q2 Gross Domestic Product (GDP) report, Nigeria’s economy would reach 2.1 percent in 2018.

His outlook is 0.5 percent points from 2.6 percent earlier projected for the nation’s growth.

“To achieve this, we believe that increased spending ahead of the 2019 elections will support non-oil sector activities, while increased oil output due to an additional 0.2 million barrels per day from the Egina Oil Field will drive oil sector growth,” he said.

In August, a $3.3 billion worth Egina Floating Production, Storage and Offloading (FPSO) had sailed from LADOL Island in Lagos to its oil field located in Oil Mining Lease (OML) 130 located some 130 kilometers off the coast of Nigeria at water depths of over 1,500 meters.

The oil field was projected raise Nigeria’s crude oil production by 200,000 barrels per day, an approximate of 10 percent of the country’s total oil production output, when it comes on stream in December.

The project, built by Samsung Heavy Industries of Korea (SHI) for the Egina oil field was primarily operated in Nigeria by the global oil giant, Total, at a cost of $16 billion.

 

Source: The Ripples

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