The oil and gas sector has been a major recipient of banking sector credit in Nigeria, with about N14.7 trillion in debt from banks as of March 2024.
This sector accounts for approximately 28% of the total lending, which highlights its significant role in the Nigerian economy.
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The total banking sector credit to the economy more than doubled year-on-year, reaching about N53 trillion at the end of the first quarter of 2024, a 76% increase from the N30.3 trillion reported in the same period in 2023.
The upstream sector of oil and gas received about N10.9 trillion in lending, while the service sector received another N3.8 trillion.
This marks a substantial increase from the N6.8 trillion in debt recorded in the same period in 2023, driven largely by exchange rate depreciation.
Nigerian banks’ total sectoral credit rose to N53.2 trillion in 2024, a 20% increase from N44.5 trillion at the end of 2023.
In the first three months of 2024 alone, about N8.7 trillion was borrowed from banks.
The oil and gas sector’s dominance in bank lending has been long-standing, with loans often denominated in foreign currency.
This has made the sector a key focus for banks due to its foreign currency earnings capabilities, serving as a derisking factor.
Debt to the upstream sector increased by about N2.6 trillion in Q1 2024, while the downstream sector saw an additional N440 billion in credit.
Other significant beneficiaries of bank credit include the general sector, which holds about 17% of total bank credit, and the manufacturing sector, holding about 16%.
The general sector saw an increase of N4.9 trillion in three months, totaling N8.8 trillion in credit by March 2024.
The manufacturing sector’s credit rose to N8.7 trillion, a 53% increase from N5.6 trillion the previous year, despite the sector representing about 10% of Nigeria’s GDP.
Agriculture, while contributing 21.07% to the GDP, only received N2.58 trillion in bank credit, about 5% of total credit.
Other critical sectors like real estate, power, and mining also have lower access to bank credit, despite their importance to the economy.
The oil and gas sector contributed 6.38% to the GDP in Q1 2024 but did not attract foreign capital during this period.
Reforms by President Bola Tinubu aim to revamp the economy and improve revenue generation from this sector.
Nigeria is positioning itself as an attractive destination for investments in the global oil and gas industry, with the Federal Government targeting a 214% increase in Petroleum Profit Tax (PPT) collections, aiming to raise N9.96 trillion from PPT in 2024.
