NPF Microfinance Bank Plc’s first quarter earnings have risen amid high risk margins as microfinance banks in Africa’s most populous country grapple with low patronage.
For the first three months through March 2017, the Bank’s net income increased by 7.35 per cent to N193.56 million from N180.30 million in same period of the corresponding year of 2016.
Net interest income rose by 16.62 per cent to N536.52 million in the period under review as against N460.04 million the previous year, driven by interest on loans and advances.
Operating income for the first three months increased by 21.47 per cent to N707.13 million compared to N582.11 million the as at March 2016.
While NPF Microfinance Bank is growing earnings in a tough and unpredictable macro environment, its operating expenses are spiking. Operating expenses in the period under review jumped by 27.81 per cent to N513.57 million, higher than the 17.20 per cent April inflation figure.
The Bank’s cost to income ratio, a measure of efficiency, increased to 72.62 per cent in March 2017 as against 69.02 per cent as at March 2016.
Experts attribute spiralling costs to huge energy cost as companies in the country spend money on the diesel oil to run branches and the head offices.
The economic downturn caused a sudden fall in oil price as shortages of dollars squeezed NPF Microfinance Bank and other Players in the industry as 68 per cent of them are exposed to high risk margin in 2016 than the previous year.
According to 2016 Central Bank of Nigeria (CBN) industry report, microfinance banks suffered low return on investment in 2016 on the back of economic downturn.
Industry players have complained of neglect by the authorities and lack of attention by government towards the sub sector. They say the industry lacks a bad bank that would bail out microfinance banks in distress.
The Assets Management Corporation of Nigeria (AMCON) was set up to bail commercial banks and buy up bad debt.
The economic downturn has shrunk the clientele of microfinance banks as these businesses are finding it practically difficult to pay back interest on loans.
Nigeria’s economy contracted by 0.52 per cent in the first quarter of the year as it witnessed the worst recession in 25 years.
NPF MFB’s return on equity (ROE) moved to 4.16 per cent in March 2017 from 4 per cent as at March 2016. Total assets were down 1.68 per cent to N12.86 billion in the period under review as against 13.08 billion the previous year.
BALA AUGIE
