The economic slowdown from the novel coronavirus outbreak has intensified risks to the Nigerian banking industry and necessitated the need to adopt a six-pronged COVID-19 response, according to a PricewaterhouseCoopers LLP (PwC) Nigeria report assessing the impact of the virus on local lenders.
Banks in Nigeria, which is predicted by the IMF to slip 3.4% this year, will have to deal with the economic contraction, higher credit losses and its attendant impact on overall asset quality, capital and liquidity.
PwC notes that banks’ loan books are exposed to some of the sectors that are the worst-hit, and lenders will face some of the biggest accounting challenges due to the fallout from the pandemic.
Read also: 78.4% of Nigerian businesses don’t plan to lay off staff – PwC survey
The banking industry also faces risks from a reduction in fee and trading income as well as on net-interest income, while cybersecurity breaches, operational constraints of keeping employees safe and meeting customer expectations and deterioration of IT and other support services because of internal challenges or vendor problems, will plague banks, according to PwC.
As a result, PwC outlined six important considerations for banks in response to the novel coronavirus. The approach focuses on Workforce, Operations and Supply Chain, communication strategy, Data, Customers and revenue, and Head Office Functions.
According to PwC, protecting one’s people and planning one’s workforce require identifying the critical work which delivers banks’ P&L, the workforce that does this and the capacity of the organisation to move labour to sustain those critical activities.
Among other things, it also involves reviewing HR policies to understand where risks are exacerbated or mitigated and the extent to which this supports or undermines the proposed response (e.g. flexible working, immigration, travel, and other relevant policies and regulations).
On maintaining business continuity and protecting supply chain, PwC identified key points which include the review of the requirements of key suppliers, such as facilities management and IT service providers, in light of any requirements that may change during a pandemic period (for instance, increased cleaning regimes).
Also, it advised scenario planning exercises to understand the financial and non-financial components of operational implications of various scenarios.
PwC also said banks should provide clarity to employees and stakeholders and enable business continuity while the focus on data will help lenders gain insight and assess their exposure to risk.
To balance customer care with commercial priorities, lenders should update their sales and demand planning strategy, including assessing changes in customer behaviour (for example, buyer habits), while extending health and safety plans to customers, among other things.
PwC also enjoined banks to combine efforts on a cross-functional basis to ensure business continuity and resilience.
