Banks show resilience amid failing economy, says report

The Afrinvest Banking Sector Report 2022 has described the banking sector as resilient despite various economic challenges.

The new report presented by the Deputy Group Managing Director, Afrinvest West Africa Limited, Victor Ndukauba, said the banks beat all the prudential guideline limits set by the Central Bank of Nigeria (CBN) and remained untainted in the face of daunting challenges.

The 17th edition of the report was unveiled alongside the company’s new digital investment app, Optimus, in Lagos. The report’s assessment of CBN’s financial stability indicators showed that industry liquidity and non-performing loan (NPL) ratios were 130 basis points (up) and 75 basis points (down), respectively.

The capital adequacy ratio is 14.1 per cent underperforming the June 2021 level by 140 basis points (bps), the report said.

It noted that all the indicators beat the prudential guideline limits despite myriads of challenges in the business environment.

The report said that growth is expected to continue in the coming years.

“Importantly, the weak economic growth has robbed banks of the dividend of large and youthful demographics. Over the last 10 years to 2021, real gross domestic product (GDP) has grown by a compound annual growth rate (CAGR) of 1.9 per cent compared to 2.3 per cent of the population.

“For banks, this reality means that upscaling would be less efficient than in an economy where growth exceeds population expansion,” he said.

The report recommended that critical reforms be undertaken as a matter of urgency to avoid a repeat of the negative trends seen in the last decade.

The Group Managing Director of Afrinvest, Ike Chioke, said since last year’s publication, the bullish projections of the global economy in 2022 had been undermined by deteriorating fundamentals.

According to him, the increasingly gloomy projections are offshoots of mounting downside risks inhibiting the global economy.

The company also unveiled a new logo in symbolism of its new brand, which Chioke said was meant to align with the company’s new direction.

“The new identity unveiled to support Optimus signals that we are now moving into the digital age. We are a digital investment bank that can do essentially what other banks can do. It is all about using technology to provide seamless services to customers,” he said.