Banking industry expects Buhari government’s support to lend to real sector

The expectations of the banking industry from the new government of Mohammadu Buhari, president- elect, that will assume office on May 29, 2015, are high.

One of the key areas of concern for the sector is for the incoming government to make policies that will support financial institutions to lend to the real sector of the economy.

It is only in recent times that banks started to give credit to sectors such as agriculture, construction, Small and Medium Enterprises (SMEs). Over the years they have concentrated more on commercial lending that has no productivity behind them, Uju Ogubunka, president, Bank Customers Association of Nigeria (BCAN), told BusinessDay on phone.

“Moving forward, banking sector should be positioned to give enough support to real sector so that there would be employment generation and enough Gross Domestic Product (GDP) to shore up foreign reserve,” he said.

There is need for the incoming government to support the mortgage sector struggling to recapitalise to do so and be able to deliver affordable housing for the citizen, he said, saying we need to get the sector to do mortgage banking driven by low interest rates. However government is going to bring down the interest rate is welcome, he said.

Another sector, Ogubunka raised concern about, is microfinance banking, which he said, is not meeting the objective for establishing it. Microfinance banks were set up to provide financial services such as savings and deposits, loans, domestic fund transfers, other financial and non-financial services to microfinance clients. “Unfortunately, that sector is an endangered sector,” he said.

According to him, there is need for the new government to focus on this sector to address their challenges so that it can meet the objective of empowering the low-income earners.

For the foreign exchange market, he said all hands must be on deck to diversify sources of foreign exchange to get more money from other non-oil sectors of the economy.

On the fiscal side, Opeyemi Agbaje, CEO, RTC Advisory Services Limited, Lagos, expects the new administration to try and rethink budget, public private partnership, borrowing profile, among others.

He said on the monetary side I expect the Central Bank of Nigeria (CBN) to remain largely the same. “In terms of banking supervision I think the CBN is still the same also. I think it may come under some pressure for closer scrutiny of banking system from the executive but by and large, I do not expect any radical change in banking supervision,” Agbeje said.

“On the back of a successful and peaceful transition in government, we expect the exchange rate to stabilise at an average of N200/$1.00 at the interbank market as electioneering wraps up,” Ayodeji Ebo, head, investment and research, and his team of analysts at Afrinvest Securities Limited, said in a report.

The depleting rate of the Nigerian external reserves (currently at $29.8bn and dipped 13.6% YTD) may taper as the analysts expect increased foreign portfolio in the near term. The eventual stop of the revenue leakages in the oil and gas space before the end of the year would increase the accretion of the external reserves.

The lag effect of the depreciation/devaluation of the naira will continue to take its toll on Nigerian’s headline inflation rate. “We retain our average inflation rate of 9.5 percent for 2015,” according to them.

They retained their 5 percent GDP growth rate forecast for 2015, despite a challenging Q1 and Q2 as a result of elections activities that staled policy implementation.

Experts in the industry said it was time for the incoming government to turn the optimism of the banking industry into a reality. Stakeholders in the banking sector had been hopeful of a rebound economy after the elections.

The Nigerian financial market has remained pressured since the build up to the 2015 general elections following the consensus forecast of possible breakout of violence post-elections. In this light, the market experienced an intense pressure with the massive exodus of funds that reflected on market return both in the bonds and equities market.

 

HOPE MOSES-ASHIKE