Nigeria and Nigerians are today marking the second year anniversary of the Buhari administration and scorecards are coming in from different sources on almost every aspect of the economy. However, one of the most critical sectors of the Nigerian economy remains the banking sector. How has this sector fared during the 2 years of President Buhari’s administration? Vanguard reports on the performance of a few of the industry’s indicators within the past 2 years.
- Asset Growth: According to the Central Bank of Nigeria, the industry’s regulator, total assets/liability of banks rose to N32.1 trillion in February from 28.4 trillion at end of June 2015 while banking industry assets and liabilities grew by 14.2 per cent per cent, as against average annual growth rate of 25 per cent.
- Public Patronage: Nigerians increased their patronage of commercial banks significantly during the period under review as the Nigeria Interbank Settlement System, NIBSS, revealed that 18 million new bank accounts were opened increasing the number of bank accounts to 98 million by the end of March 2017, from 80 million as at the end of June 2015. The number of active bank accounts also rose by almost a quarter to 67 million.
- E-payment: Probably the section witht the highest growth, the CBN revealed that the volume and value of epayment transactions in 2016 shot up by 132 per cent and 82 per cent respectively, to 942 million transactions worth N71 trillion
- Non-performing loans: As expected, the economic recession coupled with the depreciation of the Naira has meant that the number of non-performing loans has soared. The value of bad loans increased by 234% to N2.1 trillion at the end of December 2016 from N628.54 billion as at June 2015, the worst ever in the industry’s history. The effect of this was also seen in the NPL ratio as it increased to 14% from 5%.
In summary, the 2-year analysis does not give much to cheer about for the banking industry as the economic setback has meant that growth has been severely impeded while the risks associated with non-performing loans are posing more problems than previously anticipated. However, the silver lining in the cloud remains the potential for growth in the retail sector as more Nigerians are achieving financial inclusion while e-payment is now becoming more of a norm than a rarity. This avenue could provide a channel for growth in the industry.
