The 2022 Afrinvest Banking Sector Report has shown that commercial banks recorded modest improvement in all regulatory indicators despite daunting economic challenges.
The report, presented by deputy group managing director, Afrinvest West Africa, Mr Victor Ndukauba, showed that the banks beat all the prudential guideline limits set by the Central Bank of Nigeria, showing resilience and strength during the year.
Its presentation was made at the launch of the 17th edition of the Nigerian Banking Sector Report and unveiling of Optimus, Afrinvest’s digital investment app, in Lagos.
The occasion also marked the announcement of Afrinvest’s new subsidiaries and expansion of its leadership team as well as the unveil of Afrinvest’s refreshed logo (brand identity).
The report’s assessment of Central Bank of Nigeria (CBN) financial stability indicators, showed that Industry Liquidity (Liquidity Ratio) and Non-Performing Loan ratios both improved by 130 basis points(up) and 75bps(down), respectively, to 42.6 per cent and 4.95 per cent.
Although, the Capital Adequacy Ratio (CAR: 14.1 per cent) underperformed the June 2021 level by 140bps, all the indicators beat the prudential guideline limits of 30 per cent (LR), five per cent (NPLs), and 13.0 per cent (CAR), respectively, despite myriads of challenges in the business environment.
The report said the improvement is expected to be sustained over the coming years, explaining that, the fiscal challenges presented by weak federal government earnings have contributed to the muddling of monetary policy and strong use of Cash Reserve Ratio debits as a subtle strategy to compensate for the inflationary effect of ballooned overdraft to the government.
It insisted that, in increasing its developmental financing role, especially, in agriculture financing, the CBN risks crowding out banks and private sector financing, which is more effective in de-risking the sector and incentivising growth without moral hazards.
On exchange rate management, the report said, CBN’s strategy (differentiated rates across market segments and capital control) failed the litmus test over the reviewed period, as anticipated in the 2021 report.
It said the value of the naira depreciated further by 5.6 per cent and 23.2 per cent to N436.50/$1.00 and N712.00$1.00 (on 19/09/2022) at the NAFEX window and parallel market, respectively.
On the economy, the report said that in 2021, the Nigerian economy recovered markedly from the pandemic-induced strain of the prior year, saying, given the resilient half-year 2022 performance and expectation of sustained positive performance by key non-oil activity sectors in third and fourth quarters of the year, it reviewed the 2022 baseline growth forecast upward by 40bps to 3.3 per cent.
However, it maintained that growth momentum in the medium term would remain short of the level that can meaningfully lift the average well-being of the citizenry due to persistent domestic and external headwinds.
The Group managing director, Afrinvest West Africa, Ike Chioke, said Nigerians should prepare for reforms that would turn the economy around.
He said, looking ahead, Nigeria was set for another cycle of leadership in 2023 as the tenure of President Muhammadu Buhari, 30 state governors, and over 1,000 legislatures draw to a close.
