UBA’s credit expansion to boost agriculture and stimulate the economy

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Apr 03 (THEWILL) – United Bank for Africa (UBA) Plc’s aggressive lending stance to the real sector offers prospects for reviving agriculture and driving the economy towards diversification. The pan-African financial institution has sustained the expansion of its loans and advances to customers over the past five years, as shown in its 2021 audited report. Analysts say this is a clear indication of its commitment to supporting businesses and financial inclusion in Africa through its range of technology-enabled consumer loan products.

The bank’s loans and advances to customers, a core component of the balance sheet, have seen considerable growth both in fiscal 2021 and over the past five years. From 1.66 trillion naira in 2017, loans and advances to customers increased to 1.72 trillion naira in 2018, or 4.3%. It then climbed to 2,062 billion naira and 2,560 billion naira in 2019 and 2020, or 20% and 24% respectively.

The 2021 figure shows a 5% increase to N2.69 trillion from the previous year. Indeed, the bank’s loans and advances to customers have increased by 62.5% in five years.

This contributed to the unprecedented jump in assets. For the first time, the lender’s total assets crossed the 8 trillion naira mark to reach 8.54 trillion naira in 2021 from 7.7 trillion naira the previous year, an increase of 11%. UBA’s total assets grew from 4.1 trillion naira in 2017 to 8.54 trillion naira in 2021, a significant growth of 108.3%.

A demonstration of the bank’s growing popularity was seen in the noted increase in customer deposits, which grew by 133% in five years: from N2.74 trillion in 2017 to N6.37 trillion. in 2021. The amount for 2021 was 12.2% compared with the previous year’s 5.66 trillion naira, which was also an improvement from 3.84 trillion naira in 2019, reflecting 48 %.

Commenting on the bank’s 2021 results, Group Managing Director/CEO Kennedy Uzoka said he was pleased that the lender delivered the performance in the prevailing challenging environment.

“The year 2021 can best be described as a year of global recovery; economies around the world began to witness early recoveries as supply chains recovered from the devastating disruptions suffered in 2020. As a result, UBA recorded remarkable revenue growth of 7% to 660 billion naira ($1.56 billion) and its pre-tax profit (PBT) of 153.1 billion naira, up 20.3% from a year earlier. Net loans and advances rose 7.7% to N2.8 trillion, with exposure mainly to resilient economic sectors including oil and gas, agriculture and manufacturing. Customer deposits increased by 12.2%, crossing the 6 trillion naira mark, to reach 6.4 trillion naira. »

The Tier 1 lender has embarked on an aggressive lending expansion since 2017, which has created a strong loan portfolio for the real sector, particularly agriculture.

During a dinner with the UBA board 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 sector agricultural. In his remarks on “Food Security, Job Creation and the Role of the Central Bank”, the CBN Governor highlighted the critical role of banks and financial institutions in enabling more inclusive growth of the economy following to the series of external shocks facing global economies.

Emefiele, who noted the impact of access to credit on the productive capacity of the country, said that under the anchor borrower program, about $2 billion out of about $2.5 billion allocated to key initiatives in manufacturing, mining and agriculture, services had been paid to more than three million farmers cultivating more than 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% of the fund.

He said: “We knew that if the necessary support was provided to households and businesses, such as better access to finance and better infrastructure, these measures would boost productivity and help enable greater direct investment flows into our economy.

“As a result, there was a growing recognition of the need to refine our monetary policy tools and our regulatory framework to ensure that they better met the needs of the Nigerian people. It was important that this new framework enabled the flow of credit by financial institutions to critical sectors to support our efforts to stimulate productive activities and create employment opportunities for our growing population.

Emefiele said the recovery of the economy has been supported by the expansion of more than four million farmers, SMEs and manufacturers who are creating and growing businesses that enable the growth of manufacturing and ICT through a increased access to credit. He added that credit to industry increased from 10% in 2014 to 16% in 2021, while credit to agriculture increased from 3% in 2013 to 6% in 2022.

It is common knowledge that UBA has been honored with an award as the largest agricultural lender in Nigeria. by the Lagos Chamber of Commerce and Industry (LCCI) in September 2015. The Chamber of Commerce noted that UBA as early as 2009 launched the largest private sector financing program of N50 billion to support the agriculture and agro-industrial industries in Nigeria. He commended the bank for maintaining its commitment to the agricultural sector by devoting an average of 7% of its loan portfolio to agricultural finance, well above the banking sector average of 4%.

UBA was also one of two banks selected in 2010 to administer the N200 billion agricultural fund set up by the CBN due to the bank’s commitment to agricultural finance as well as its distribution throughout the country.

It was reported in February 2020 that the UBA had led other banks in repaying a N387.2 billion loan as part of the CBN’s N622 billion total disbursed to commercial banks in the 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 providing loans to farmers at a maximum interest rate of 9%.

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

UBA has deepened its consumer product offerings with the aim of providing services that will empower customers, thereby driving economic growth on the continent. The bank attaches great importance to consumer loans because of the active role it plays in economic development.

She said consumer credit is very critical to her as it is the individual and household centric category of financing which includes personal loans given to people who use the funds for individual or family purposes as well as home and auto loans.

UBA delivered an impressive performance across key financial metrics in its 2021 Annual Report for the period ended December 31, 2021. Listed on the Nigerian Stock Exchange’s (NGX) prestigious Premium Platform, the bank’s earnings before tax (PBT) increased by 20.3% to N153.1 billion from N127.3 billion at the end of the previous year. Similarly, Profit After Tax (PAT) increased by 8.7% to N118.7 billion in 2021 from 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 foundation of the positive results the bank has recorded over the years, adding that the current performance highlights UBA’s relentless customer focus and leveraging its key strategic levers – people, process and technology.

“Looking ahead, I am particularly excited about our ongoing business transformation program, designed to improve the bank’s process agility, service delivery and customer experience. We are also making significant investments in advanced technology and cybersecurity, to keep our innovative digital banking offerings above the curve, as we equip and revamp our human resources to compete and win in a rapidly changing landscape. . This will ensure that the bank continues to achieve respectable revenue and earnings growth over the medium to long term,” the GMD said.

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