Nigerian Financial Institution Remains Resilient

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The Nigerian banking sector dynamics continued to change in 2020. By the National Bureau of Statistics (NBS) estimates, the financial services sector came through as one of the best performing sectors in the economy despite the recession.

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The sector printed a 6.89% growth in Q3-2020 (Vs. -3.1% expansion for the broader economy). Notably, total assets for banks saw double-digit growth, thanks to the massive expansion in cash & cash equivalents, amid increased system liquidity and exchange rate devaluation.

Industry NPLs sustained a downtrend so far in 2020

Banking Remains Resilient Brandspurng
Sources: CBN, NBS, United Capital Research
With pressure from the CBN on banks to lend, Nigerian banks expanded their loan books by a massive N4.0trn while interest rates on lending and deposits fell to record levels.

While previous episodes of aggressive increase in loan growth appear to have been associated with a surge in Non-Performing loans ratios, it is interesting to note that industry NPLs sustained a downtrend so far in 2020, sliding from 9.3% in Q2-2019 to 5.7% as at Q3- 2020, despite the threat of Covid-19 pandemic on asset quality across the sector.

Notably, this number was partly moderated by the CBN’s stance for banks to grant a forbearance period to customers at the start of the pandemic.

Going forward, we imagine that banks will be compelled to sustain credit expansion to the real sector with the main beneficiary being the Manufacturing, General Commerce, Agric and Forestry, Construction and ICT sectors considering the CBN’s increased efforts to reduce credit expansion to the oil & gas sector while expanding credit to other sectors.

Nevertheless, we think asset quality concerns in the sector would possibly worsen as the loan book continues to expand. As such, NPL ratios are likely to retrace northwards.

Gbenga Samson
Gbenga Samsonhttp://ThisDayLive.com
Samson Gbenga Salau [Editorial Board Adviser] Gbenga Samuel Salau is a professional journalist with over 17 years experience in journalism, he is a graduate of Communication and Language Arts, University of Ibadan. On completion of his youth service, he joined The Guardian as a freelance journalist and was later absorbed as a staff. While in the University, he was a campus journalist reporting for the Independence Hall and Faculty of Arts Press Clubs. As a campus journalist, he won the following awards; Independence Hall Press Best News writer; University of Ibadan Union of Campus Journalists’ Best News Reporter/Writer; First Runner-up, Reuben Abati Award for Investigative Journalism; Association of Faculty of Arts Students’ Press Best Reporter; University of Ibadan Union of Campus Journalists’ Best Political Writer; Winner, Reuben Abati Award for Investigative Journalism, and University of Ibadan Union of Campus Journalists’ Best Interviewer. He served the Association of Communication and Language Arts Students, as the Public Relation Officer, the same year he was appointed the News Editor of the Association of Faculty of Arts Students Press. The following session, he was made the General Editor, and a member of the 13-man University of Ibadan Students’ Union Transition Committee. As a reporter in The Guardian, in 2014, he won the Promasidor Quill Award Best Report on Nutrition and DAME Business Reporting category. In the 2015 edition of the Promasidor Quill Award, he won the best Report on Nutrition and Brand Advocate Categories, while in 2016, he won the NMMA Print Journalist of the Year, first runner-up Golden Pen Reporter of the Year and SERAs CSR Awards. Gbenga Salau loves traveling, reading, and listening to songs with good lyrics no matter the genre.

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