• Tuesday, April 16, 2024
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BusinessDay

Afreximbank expect banks’ earnings to decline on regulation, market changes

Afreximbank’s total assets rise 20% in one year

Analysts have projected that Nigeria’s major banks would see a decline in earnings this year due to challenges in adapting to regulatory and market changes, according to a new report by Afreximbank.

The report revealed that the Central Bank of Nigeria’s policy shift to an orthodox policy may shrink the earnings of Nigerian banks, especially foreign exchange-dependent ones.

“Analysts anticipate major banks facing earnings contraction in 2024, highlighting the challenge of adapting to regulatory and market changes,” the report said.

It said Nigeria’s currency crisis caused inflation to soar to as high as 31.7 percent in February and that the devaluation of the naira and heavy import dependency have made essential goods unaffordable for many people.

“Despite central bank efforts, high demand for dollars persists, hampering monetary policy effectiveness. To address this, the government must enact reforms to boost
exports and attract foreign investment.

“Regulation of parallel market Nigeria continues to tighten regulations on street trading of FX while raising the capital requirements for bureau de change operators to stabilise the FX market,” the report added.

According to authors of the report, Nigeria plans to join Brazil, Russia, India, and China (BRICS) to strengthen its relationship with Russia.

“Officials hinted on this move in 2023 emphasising that Nigeria’s intention to join BRICS would not be influenced by Western powers,” they said.

They added that there is worsening food scarcity in Nigeria. “While some argue food scarcity isn’t the issue but rather affordability, rising insecurity worsens the situation as farmers pay bandits for access to farms, impacting food prices despite a government emergency declaration.”

“As Ramadan starts, Nigeria faces over 35 percent food inflation. Despite government efforts like distributing aid and releasing grain reserves, prices continue to rise sharply, with staple foods jumping by 50-100 percent in a month,” Afreximbank said.

Afreximbank said Ramadan may worsen the situation as demand spikes, while adding that insecurity, especially in Northern Nigeria, compounds the problem as farmers abandon their fields, disrupting food supplies further.