By NKIRUKA NNOROM

Banks’ lending to private sector which has been dawdling since the Central Bank of Nigeria, CBN, commenced its reform of the banking sector is expected to show some form of improvement this year, FBN Capital, the investment arm of First Bank of Nigeria PLC, has said.

The company stated in its monthly economic review and analysis that there will be an expected growth rate of about 20 per cent in lending to the private sector by the time the year draws to a close.

It also stated that activity in the oil & gas, power and agriculture sectors will experience tremendous improvement contrary to what obtained the previous year.

The company affirmed there is no likelihood of banks being unduly to lending risk as most of them are yet to recover from the loses of the recent past.

“We do not have concerns about a new credit bubble in Nigeria. The banks learnt lessons in 2008 and 2009, with some paying the ultimate price by being taken over by the CBN. Additionally, regulation has been considerably tightened,” it said.

“The data on lending by sector is almost one year old. We detect higher activity in the oil and gas, power and agriculture sectors,” the report added.

Giving a breakdown of economic activities in the previous year, the firm explained that lending by the banking sector to the private sector grew by 4.1 per cent in month-to-monthin December and by 33 per cent year-on-year.

Iit noted however that the year on year figure was deceptive ‘since total loans outstanding contracted by N1.05 trillion (9.7 per cent m/m) in December 2010 due to write-offs under the direction of Asset management Corporation of Nigeria (AMCON).

Affirming this development, a research and investment advisory company, Afrinvest Limited, stated that with the banking sector reforms well at an advanced stage, it is expected that there would be an increased credit flows to the private sector during the year.

“After consistent year-on-year declines in half year, 2011, credit to the private sector seems to have picked, recording about 7.6 per cent growth y-o-y in September 2011; 15.9 per cent in October and 15.5 per cent in November 2011 to stand at N12.4trn, 163.8 per cent higher than the federal government budget for 2012,” the company said in the review.

“While Nigerian banks have a penchant for playing the corporate high-end lending space with a cheap low cost funding pool, we expect banks’ increasing focus on retail lending in 2012 to favour more customers at the lower end of the spectrum,” it added.