The third quarter GDP report released by the National Bureau of Statistics showed Nigeria’s financial sector reported a real GDP growth rate of about 2.85%.
The banking industry fell into a recession after it followed its first quarter real GDP contraction of 13.16% with a 13.24% contraction in the third quarter.
However, fortunes for Nigerian banks seems to have changed after the CBN floated the naira officially in June 2016, the first month of the tail end of the second quarter of 2016. The impact of the devaluation was overtly positive for most banks with majority reporting billions in increase in foreign currency gains.
According to data from their annual reports, most commercial banks reported boosts in foreign currency incomes due to the depreciation of the naira. For example, GT Bank, the largest by market capitalization, reported a foreign currency gain of about N93.6 billion. UBA another of the Tier 1 banks reported a gain of N41.6 billion. FBNH the parent company of First Bank also gained N68.4 billion in the first 9 months of 2016 alone. Ecobank reported a N57 billion forex gain within the period also.
Most banks have been accused of manipulating the fractured forex market to their own benefits even though critics of the CBN point out to its failed polices for the reason, leaving banks with no choice but to arbitrage. For some banks, not arbitraging could mean reporting significant losses on trades or not being able to book any revenues.
Whilst it wasn’t all banks that recorded gains, the data suggest this contributed significantly to their bottom lines helping many banks avoid what may have been a loss making quarter. Analysts still believe most banks are at risk and a potential spate of bad loans could be made them take larger provisions in the future leading to more losses.