Banking
From The Report: Nigeria 2017
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Despite the challenges to Nigeria’s economy, many of the country’s banks enjoyed healthy revenue and asset growth in 2016. Asset quality issues continue to hinder the sector, but banks have found avenues outside of lending activities to expand their balance sheets. One area of growth stemmed from the devaluation of the naira in 2016. According to the IMF, 45% of loans held by banks are in a foreign currency. Upon devaluation, the book value of these loans in naira terms grew instantly. Naira devaluation provided a one-off boost to the value of existing assets, but material growth in forex or naira lending is not expected in 2017. The purchase of government securities is providing one of the few significant sources of actual revenue growth in the sector. While the past two years have been challenging for Nigerian banks, there is a sense that the industry has turned a corner, and that conditions are set to improve.

This chapter contains interviews with Godwin Emefiele, Governor, Central Bank of Nigeria; and Godwin Nwabunka, CEO, Grooming Centre.

Articles from this Chapter

Overview

Road to recovery: Reforms help the sector achieve stability and growth
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Despite the challenges to Nigeria’s economy, many of the country’s banks enjoyed healthy revenue and asset growth in 2016. Asset quality issues continue to hinder the sector, but banks have found avenues outside of lending activities to expand their balance sheets. One area of growth stemmed from the devaluation of the naira in 2016. According to the IMF, 45% of loans held by banks are in a foreign currency. Upon devaluation, the book value of these loans in naira terms grew instantly.…

Interview

Making money work: Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), on the status and expansion of financial services
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Interview:Godwin Emefiele What can be done to boost the provision of credit to the private sector in Nigeria? GODWIN EMEFIELE: The adoption of the Secured Transactions in Movable Assets Act by all players in the Nigerian financial system should be enforced, as it is aimed at tackling the issue of inadequate collateral – one of the major obstacles faced by small and medium-sized enterprises (SMEs) in their effort to access finance. Another initiative includes the quick adoption of the move…

Analysis

Capital limits: The private sector pushes for additional finance amid a crowded lending market
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Financial intermediation – the process of matching savers with borrowers – is a primary function of the banking sector. Intermediation channels excess funds towards productive uses, spreading the risk across a bank’s entire depositor base so no single saver bears the losses in the event of a loan default. However, in Nigeria intermediation is slowing, with lending activity being affected by government borrowing. “When the government is borrowing so much from the economy, it means…

Analysis

Looking abroad: Easing of capital controls set to increase foreign exchange liquidity
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A primary issue affecting Nigeria’s economy in recent years has been the decline in foreign reserves, particularly the shortage of US dollars, which have been hit by low oil prices. This slump in the price of oil has caused major complications for the Nigerian economy as a whole, particularly given the increasingly high demand for imports ranging from industrial equipment to food staples. A decreasing volume of dollars in circulation led the Central Bank of Nigeria (CBN) to restrict access…

Interview

A point of access: Godwin Nwabunka, CEO, Grooming Centre, on strengthening the microfinance segment and the impact of digitisation
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Interview:Godwin Nwabunka What is the single biggest challenge facing microfinanciers in Nigeria? GODWIN NWABUNKA: The biggest challenge is the inadequate recognition of microfinance as a vibrant and important sector with very high potential. Rather, it is seen as a small sub-sector within the financial space. Therefore, it is not sufficiently provided for in terms of its growth and developmental requirements. Although the regulatory framework exists and has undergone review, there are no…

Analysis

Cashing in: The push to increase levels of electronic banking continues
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While Nigeria’s economy remains largely cash-based, there has been an increased focus since 2012 on reducing inefficient cash transactions. According to the Central Bank of Nigeria (CBN), an excess of currency in circulation has hindered plans to stabilise prices. In addition, the costs associated with currency sorting, cash management, transport and frequent printing have also kept bank service fees and lending rates high. Having such a substantial volume of cash-based transactions has…

Analysis

Positive disruption: An eager market looks to financial technology to boost growth
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Boasting Africa’s largest economy and population, but facing a number of structural constraints, Nigeria is a market ripe for digital disruption. It benefits from a high level of internet and mobile penetration. It also skews young: by 2020, roughly half of the country’s population will be under the age of 25. A number of start-ups have gained traction over the past decade, from retailers like Jumia, an e-commerce website, to streaming platforms such as iRoko. One of the start-up sectors…