Ike Chioke, the group managing director Afrinvest, has projected that the Nigerian banking sector is stable and positioned for growth with the total Nigerian banking assets expected to grow by 14.3 per cent to N54.3 trillion by the end of the year, with further growth projections in 2021.
Speaking at the launch of Afrinvest 2020 Nigerian Banking Sector Report titled: ‘The Insecurity challenges of poverty’ in Lagos, yesterday, Chioke said excerpts from the report expressed optimism in the banking industry.
“Total industry asset, we are projecting that the industry would end the year with N54.3 trillion in asset climbing 14.3 per cent from 2019. And 2021 we are projecting a further growth to about N57.8 trillion in industry asset
“In terms of industry deposits, we have seen it rise sharply following significant open market operations (OMO) maturities. So this year, we are looking at about 35.8 trillion of industry deposits and that would continue to climb to N38.1 trillion of deposits into 2021.”
He also noted that the Central Bank of Nigeria (CBN)’s policy on loan to deposit ratio (LDR) is upright imitative but is alleviating banks non-performing loans books.
He said, “When you look at loan to deposit ratio, the CBN threshold is at 65 per cent and quite a number of the tier 1 banks are below that threshold except Zenith Bank and when you come to the tier 2 banks, only Fidelity, FCMB and Sterling Banks are above with Stanbic, Wema and Unity below.
“So, it tells that the banks are struggling to meet the requirements of this policy and we can understand that because when you look at numbers of NPLs based on H1 numbers you can see that with the threshold at five percent CBN recommends bank not to exceed, quite a few banks have tended above that number.
“Ecobank is at 9.9 per cent, FBN holdings at 8.8 per cent, GTBANK at 6.5 per cent, and for tier 2 banks Stanbic at 5.2 per cent with the rest below the alignment. So that can be trouble because that would put into question the demand to increase loans due to LDR but you are doing it in the middle of a troubled economic environment which means it is more difficult for the borrowers to perform on the loans.”
Speaking also at the launch, Senior Vice President and Head of Financial Advisory at Africa Finance Corporation (AFC), Mr. Fola Fagbule urged the federal government to work on improving investor confidence in order to attract foreign direct investments.
He said, “What we are dealing with in Nigeria is a crisis of confidence. Which is beyond a collapse of global oil prices and COVID-19 pandemic as to reasons why we are having difficulties attracting capital.
“We have a fractured situation where there is not even confidence in the sovereign to start with and when you don’t have confidence in a financial arrangement in the way that the sovereign has set itself up to do business in the eyes of the world, domestic commercial market, local capital markets, you can imagine how hard it is for everybody else that is further down the hierarchy to establish that confidence.
“So, I do think fundamentally we need to fix this crisis of confidence in Nigeria’s macroeconomic management in Nigeria’s sovereign financial situation and the general perception organisation of Nigeria as an entity.”
He furthered that “There are many things we need to stop doing which would signal that there is a new direction a country, state or business or sector is taking and we know what those things are.
Subsidies that are inefficient and are not achieving their objective or whether it is in relation to revenue leakages within the government, policies that are not helpful as far as market pricing of commodities is concern.
“So, we need to signal by stopping those things while also preparing ourselves with the right policies for attracting capital from various sources.”