BANK lending has been predicted to rise significantly in the second quarter of the financial year.Speaking with the Oxford Business Group (OBG), the global publishing, research and consultancy firm, Bisi Onasanya, group managing director and chief executive officer of First Bank Nigeria Plc attributed a dip in bank lending to the April elections, which he said prompted a showdown.Figures show that lending growth turned a corner to reach five per cent by the end of last year after plummeting in the wake of the 2008 global financial crisis, which was exacerbated in Nigeria by troubles in the domestic banking sector.Lending growth was suppressed last year, partly due to a conservative response from banks following the stress test which the CBN conducted in 2010, he said. The elections are slowing loan growth for the first half of 2011, but there will be a major increase after elections in April. I expect loan growth of 10 per cent in 2011, which is double the five per cent figure for 2010.Onasanyas input helps inform the comprehensive analysis of Nigerias banking sector that appears in The Report: Nigeria 2011, OBGs forthcoming guide on the countrys economic activity and investment opportunities.OBGs report will include a detailed, sector-by-sector guide for foreign investors, together with a wide range of interviews with the most prominent political, economic and business leaders, including the U.S. Under Secretary of State Maria Otero, the Managing Director of the World Bank Ngozi Okonjo-Iweala and the Chairman and CEO of Cisco, John T. Chambers.Onasanya acknowledged that businesses in Nigeria still faced an uphill struggle to obtain credit from banks, despite CBN Governor Lamido Sanusis high-profile campaign to encourage growth by stimulating SME financing.He believes banks are unlikely to increase lending to smaller businesses, which are viewed as a higher risk than big corporations, unless lending rules are relaxed.Although SMEs have access to some credit, the risk tolerance limit is too high, he said. The banks cant be blamed since they have to meet provisions when the CBN tests their portfolios. The government and the Central Bank should consider implementing risk sharing to increase the flow of credit to higher risk areas.With bidding for Nigerias unhealthy banks drawing nearer, Onasanya highlighted the importance of ensuring that the selling process was clearly laid out in a framework if legal wrangles and lengthy court cases were to be avoided.Ten of Nigerias banks are up for sale after they failed to meet standards set out in an audit undertaken by the CBN in the wake of the 2008 crisis. The move is set to bring consolidation to the sector, with observers expecting the process to reduce the number of players to 15.Due process must be followed involving the boards of directors and shareholders, he said. Otherwise, if the distressed banks are sold by the CBN rather than by the actual owners, each acquisition will go into irreconcilable litigation.Onasanya also highlighted the importance of ensuring that adequate capital in real terms is brought to the table rather than virtual funds. The CBN must ensure that the acquiring institutions do not over-leverage in their attempt to acquire an institution, he said. Otherwise, the acquirers could start to take funds out of the acquired institution to service the cost of the acquisition which is counterproductive, he said.The Report: Nigeria 2011 will mark the culmination of almost a year of on-the-ground research by a team of analysts from OBG. It will provide information on opportunities for foreign direct investment into Nigerias economy and will be a guide to the many facets of the country, including its macroeconomics, infrastructure, political landscape, banking and sectoral developments.OBGs new report will provide in-depth analysis of the development of equity finance in Nigeria and the creation of a corporate bond market. It will also consider the implications of the Petroleum Industry Bill and explore the prospects for incoming fiber optic cable capacity.
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