Nigeria’s banking industry total assets are expanding strongly and are expected to grow by 14.3 percent to N54.3 trillion at the end of 2020, from N47.5 trillion in 2019, driven by deposits growth, Ike Chioke, group managing director, Afrinvest West Africa said on Tuesday.
He stated this in the Nigerian banking sector report released on Tuesday by Afrinvest. He sees the industry’s total assets growing by 6.4 percent to N57.8 trillion in 2021.
The industry’s total deposits rose sharply by 17.6 percent to N34 trillion in 2019 following significant Open Market Operation (OMO) maturities. This is expected to grow by 5.3 percent to N35.8 trillion in 2020 and 6.4 percent to N38.1 trillion in 2021.
In the first half of 2020, the Central Bank of Nigeria (CBN) issued OMO bills worth N6.38 trillion, which was 46.10 percent decrease compared with N11.851 trillion issued in the corresponding half of 2019.
Public subscription and sale amounted to N8.567 trillion and N6.453 trillion, respectively, compared with N13.054 trillion and N11.827 trillion, subscribed to, and allotted, in the corresponding half of 2019.
The report showed that the industry’s total loans stood at N21.2 trillion in 2019, which represented 14.6 percent increase when compared with N18.5 trillion recorded in 2018. The growth in loans has been driven by CBN’s minimum 65.0% Loan to Deposit Ratio (LDR) policy.
The Apex bank increased banking sector LDR to 60 percent and later 65 percent in 2019. The report expects the industry’s total loans to grow by 9.4 percent to N23.2 trillion in 2020 and by 5.2 percent to N24.4 trillion in 2021.
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“In 2020, we expect to see a sustained increase in industry total loans as Deposit Money Banks (DMBs) comply with the CBN’s LDR directive amongst others,” Chioke said.
The downside risk he said is the asset quality deterioration which could hamper earnings growth and other key financial metrics such as Return on Equity (ROE) and Return on Asset (ROA) in 2020 and beyond.
The theme for the banking sector report, which was unveiled in Lagos on Tuesday was ‘The Insecurity Challenges of Poverty’.
On insecurity, Chioke said insecurity incidents and deaths have been on the rise since 2017. The total death count reported since 2011 is 74,286 across over 9,000 incidents involving Boko Haram, state actors, kidnappers, robbers, sects, election-related actors, and other armed groups.
“Nigeria must actively be aggressively widening economic opportunities every year to curb poverty and insecurity,” he said.
He said 4 out of 10 individuals in Nigeria currently live below N377/day and that about 6 in 10 Nigerians are either unemployed or underemployed.
Osita Ogbu, professor of Economics at the University of Nigeria, Nsukka, said there is a need for holistic solutions in solving insecurity and poverty in the country.
He said it is not about tradermoni but about giving the poor a stake in the economy. He said it is about stimulating inclusive growth, expanding the manufacturing sector, and taming inflation, amongst others.
“We must learn to govern differently. A war against insecurity should be a comprehensive one,” he said during the banking sector report launch, which was held both physically and virtually.
