Agusto & Co. Limited , Nigeria’s foremost research house and rating institution recently released its flagship 2021 Banking Industry Report , which is the most current and comprehensive report on the banking industry in Nigeria based on the review of the financial statements of twenty commercial banks and five merchant banks. The report reviewed the Industry structure, financial condition, the regulatory environment in addition to the macroeconomic environment and its impact on the Nigerian Banking Industry.
According to Agusto & Co’s Banking report, the COVID-19 pandemic brought about an extraordinary test for the global community. Although the global COVID mortality rate stands low at about 2.2%, casualties increased from less than 3,000 in December 2019 to about 3.9 million as at 30 June 2021. Nigeria’s mortality rate stood comparably lower at about 1% as at the same date. However, the local economy had its fair share of pandemic-related adversities. However, leveraging lessons from the 2016/2017 economic recession, the Nigerian banking industry was better prepared in 2020. Proactive measures in the form of forbearance granted by the Central Bank of Nigeria CBN), enabled banks to provide temporary and time-limited restructuring of facilities granted to households and businesses severely affected by COVID-19. There was generally a cautious approach to lending in the Industry, given difficulties in the operating environment. Although gross loans and advances grew by 12%, loan growth was negative when the 19.3% naira devaluation is considered. Underpinned by the forbearance and proactive measures adopted by banks, the NPL ratio improved to 6.6% (FYE 2019: 7.6%).
The reliability of business continuity measures was tested in 2020, considering the movement restrictions that lasted for months. Most banks showed resilience through innovative measures including remote work arrangements and upgrade of network infrastructure to accommodate higher traffic on digital channels. These arrangements also provided support during the mandatory curfew elicited by the civic unrest that followed the #EndSARS protests in October 2020. Indeed, the pandemic brought to the fore, technology’s crucial role in deepening financial services as some banks recorded as much as a 50% increase in digital banking transaction volumes. However, Agusto & Co notes that these gains were limited by the CBN-induced reduction in bank charges, which took effect in January 2020. As a result, electronic banking income declined by 27.3%, accounting for a lower 13.2% (FY 2019: 21.1%) of non-interest income.
The CBN’s policies targeted at lowering interest rates have persisted especially given […]