Nairametrics| The Central Bank of Nigeria (CBN) has released its February report on the banking industry. With not so many reasons for the average bank depositor to cheer, the commercial banks themselves will be hoping for better fortunes in the coming reports. However, there still remain some bright spots in an otherwise bleak report. Here are 5 takeaways from the report.
- Banks themselves are not so happy: With commercial banks suffering a loss in value of about 170.2 billion (from N32.29 trillion in January to N32.1 trillion in February) in just one month, the ongoing recession, increasing non-performing loans and declining Capital Adequacy Ratio are taking their toll the net-worth of the sector. However, never being one to lose the banks are helping themselves out by drawing down their reserves with the CBN, as well as the frequent patronage of its Standing Lending Facility.
- Banks don’t care about diversification: all the talk about the diversification of the economy and investment into the real sector has fallen on deaf ears of commercial banks as they are not interested in borrowing these manufacturers. As the report showed, funds sourced were largely used not in credit extension to the real sector operators, but for the patronage of the Federal Government’s securities at a higher yield, basically profit-making. And to add insult to injury….
- …the customer always loses: It has never been a very profitable venture to be a depositor in Nigeria and the situation is worsening. While a depositor will earn an average of between 4.2% and 8.51% interest for ‘borrowing’ the bank, the bank will charge that same customer as high as 29.3% to borrow from it. Similarly, one-month and 12-month maturity deposit rates fell from 8.58 per cent and 10.77 per cent in January 2017 to their respective levels of 8.24 per cent and 10.37 per cent, at end of February 2017.
- And to what looks like a bright spot: Despite the preceding points, the commercial banks increased their overall credit to the domestic economy rose by 1.2 per cent to N21.8 trillion, against N21.54 trillion recorded at the end of January 2017. This was attributed to the 4.8 per cent and 0.2 per cent increase in claims on the Federal Government and claims on the private sector.
- Banks are still hanging in there: Even though the ratio of total specified liquid assets of commercial banks to their total current liabilities reduced from 44.3% in January to 42.2% in February, they still remained a comfortable 12.2% above the minimum 30% approved by the CBN.
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