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UBA’s Credit Expansion To Boost Agriculture, Stimulate Economy

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April 03, (THEWILL) – The aggressive lending posture of United Bank for Africa (UBA) Plc to the real sector holds prospects for boosting agriculture and stimulating the economy towards diversification.  The Pan African financial institution has sustained the expansion of its loans and advances to customers in the past five years, as seen in its 2021 audited report. Analysts say it is a clear indication of its commitment to the support of businesses and financial inclusion in Africa through its array of consumer lending products, leveraging on technology.

The bank’s loans and advances to customers, a critical component of the balance sheet, recorded a tremendous growth both in 2021 FY and in the past five years. From N1.66 trillion in 2017, loans and advances to customers rose to N1.72 trillion in 2018 reflecting 4.3 percent.  It thereafter climbed to N2.062 trillion and N2.56 trillion in 2019 and 2020 representing 20 percent and 24 percent respectively.

The 2021 figure shows an increase of 5 percent to N2.69 trillion compared with the preceding year. Effectively, the bank’s loans and advances to customers expanded by 62.5 percent in five years.

This contributed to the all-time high jump in assets. For the first time, the lender’s total assets crossed the N8 trillion mark to hit N8.54 trillion in 2021 against N7.7 trillion in the preceding year, representing 11 percent increase. UBA’s total assets rose from N4.1 trillion in 2017 to N8.54 trillion in 2021 – a significant growth of 108.3 percent.

A demonstration of the bank’s rising popularity showed in the noted  rise in deposits from customers, which recorded a 133 percent growth in five years: from N2.74 trillion in 2017 to N6.37 trillion in 2021.  The amount for 2021 was 12.2 percent compared with the preceding year’s N5.66 trillion, which was also an improvement on the N3.84 trillion in 2019, reflecting 48 percent.

Commenting on the bank’s 2021 result, the Group Managing Director/CEO, Kennedy Uzoka, expressed delight that the lender recorded the performance amid the prevailing tight environment.

“The year 2021 can best be described as a year of global recovery; economies around the world began to witness early-stage recoveries, as supply chains recover from the devastating disruptions suffered in 2020. Consequently, UBA recorded a remarkable 7% growth in top line to N660 billion (USD1.56bn), and profit before tax (PBT) of N153.1 billion, up 20.3% from the prior year. Net Loans and advances grew by 7.7% to N2.8 trillion with exposure mostly to resilient economic sectors including oil & gas, agriculture and manufacturing. Deposit from customers grew 12.2%, crossing the N6 trillion mark, to N6.4trillion.”

The Tier-1 lender embarked on aggressive loan expansion since 2017 which has created robust lending portfolio for the real sector, especially agriculture.

At a dinner session with the board of UBA in Abuja in February 2022, the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, hinted at plans to increase credit to the agricultural sector. In his remarks on, “Food Security, Job Creation and the Role of the Central Bank,” the CBN governor, stressed the critical role of banks and financial institutions in enabling more inclusive growth of the economy following the series of external shocks that had confronted economies globally.

Emefiele, who noted the impact of access to credit on the productive capacity of the country, said that under the Anchors Borrowers’ Programme, about $2 billion out of about $2.5 billion earmarked for key initiatives in the manufacturing, mining, and agriculture, services sectors had been disbursed to over three million farmers cultivating over 4.7 million hectares of arable land in 36 states and the Federal Capital Territory (FCT). He pointed out that the agricultural sector received almost 80 percent of the fund.

He said, “We were aware that if the necessary support was provided to households and business such as improved access to finance, and better infrastructure, these measures would boost productivity, and help in enabling greater direct investment flows into our economy.

“As a result, there was a growing recognition on the need to refine our monetary policy tools and regulatory framework in order to ensure that it was more responsive to the needs of the Nigerian populace.It was important that this new framework enabled the flow of credit by financial institutions to critical sectors in order to aid our efforts at driving productive activities and creating job opportunities for our growing population.”

Emefiele stated that the recovery of the economy has been supported by the expansion of over four million farmers, SMEs, and manufacturers who are building and growing enterprises that are enabling growth in manufacturing and ICT due to increased credit access. He added that credit to industry increased from 10 percent in 2014 to 16 percent in 2021, while credit to agriculture increased from 3 percent in 2013 to 6 percent in 2022.

It is on record that UBA was honoured with an award as Nigeria’s biggest lender to agriculture.  by the Lagos Chamber of Commerce and Industry (LCCI) in September 2015. The Chamber of Commerce noted that UBA, as far back as 2009, floated the largest private sector funding scheme of N50 billion to support agriculture and agro-processing industries in Nigeria. It commended the bank for sustaining its commitment to the agricultural sector by committing an average of 7 per cent of its loan book to agricultural financing, well above the banking industry average of 4 percent.

The UBA was also one of the two banks selected in 2010 to administer the N200 billion agriculture fund set up by the CBN because of the bank’s commitment to agricultural financing as well as its spread across the country.

It was reported in February 2020 that UBA led other banks in the  re-payment of N387.2 billion loan as part of the total N622 billion disbursed by the CBN to commercial banks under the Commercial Agriculture Credit Scheme (CACS). The N622 billion fund was disbursed to participating banks to enable them to finance commercial agricultural enterprises by giving farmers loans at a maximum interest rate of 9 percent.

Out of the N83.5 billion disbursed by the CBN to UBA for 52 projects, about N53 billion was repaid. Zenith Bank and First Bank of Nigeria repaid the sum of N83.3 billion and N44.8 billion out of the N126.94 billion and N52.99 billion respectively.

The UBA has deepened its consumer product offerings with the aim to deliver services that will empower the customers, thus stimulating economic growth on the continent. The bank takes consumer lending very important because of the active role it plays in economic development.

It said that consumer lending is very essential to it  as it is the category of financing centred on individual and household consumers, which includes personal loans extended to people who use the funds for individual or family purposes as well as home and auto loans.

UBA achieved an impressive performance in key financial parameters of its 2021 full year report for the period ended December 31, 2021. Listed in the prestigious Premium Platform of the Nigerian Exchange (NGX), the bank’s profit before tax (PBT) rose 20.3 percent to N153.1 billion, compared to N127.3 billion at the end of the preceding year.  Similarly, profit after tax (PAT) grew by 8.7 percent to N118.7 billion in 2021, compared to N109.2 billion recorded in 2020.

The GMD explained that the quality of UBA’s portfolio, as well as the strength of the bank’s credit risk management frameworks and policies, remain the bedrock of the positive results that the bank has been recording over the years, adding that the current performance highlights UBA’s relentless customer focus, and leverage on its key strategic levers – People, Process and Technology.

“Looking forward, I am particularly excited about our ongoing Enterprise Transformation Program which is designed to enhance the bank’s process agility, service delivery and customer experience. We are also making sizeable investments in cutting-edge technology and cyber security, to keep our innovative digital banking offerings above the curve, as we tool and re-tool our human resources to compete and win in a rapidly changing and evolving landscape. This will ensure the bank continues to achieve respectable top and bottom-line growth through the medium to long term,” the GMD stated