One of the internal criteria used by banks to determine amount in bank loans to allocate to a particular sector of the economy is the level or ratio of Non Performing Loans (NPLs) in that economic sector.
Sectors with high and /or growing NPLs may not enjoy much of bank loans, as banks will be wary of providing more funding to operators in that sector until much progress is made at recovering the NPLs or the ratio is brought down to tolerable level. While on the other hand, operators in economic sectors with low and/or reducing NPLs may become toast of banks for funding.
Analysis of figures on Selected Banking Data Q3 2019 from the National Bureau of Statistics (NBS) reveals the economic sectors with reducing NPLs as well as those with incresing economic sector NPL ratios. Of the 21 Economic sectors that banks lend to, NPL rates for 16 sectors reduced while it increased for 5 sectors.
5 sectors, namely: Minning and Quarrying, Finance and Insurance, Power and Energy, Capital Market and Oil and Gas sectors had the most reduction in their NPL percentage, recording 100%, 85%, 71%, 91% and 74% reduction in Q3 YoY NPL percentage respectively.
Also 5 sectors: Public Utility, General Commerce, General, Administrative and Support Services, Human Health and Social Work, Art, Entertainment and Recreation recorded less than 30% reduction in their Q3 YoY NPL percentage.
5 sectors are the black sheet in Q3 YoY NPL percentage growth: Agriculture, Government, Water Supply, Construction and Education are the sectors that had growth in their YoY NPL percentage as at Q3 2019 with 3%, 132%, 38%, 13% 95% respectively. Government Ministries and Parastatal and Construction Industry grew their Q3 2019 YoY NPL percentage the most.
Banks may not completely neglet sectors with high and/or growing Economic sector NPL percentage as the reasons for such high or growing ratios may be perculiar to customer/s or bank/s but they may take special precautions and demand extra comfort (Collaterals) for loans to operators in such sectors.