Commercial banks recorded modest performance in all regulatory indicators despite various economic challenges, the ‘2022 Afrinvest banking sector report’ said.
The report showed that the sector, through resilience and strength beat all the prudential guideline limits set by the Central Bank of Nigeria.
The Deputy Group Managing Director, Afrinvest West Africa, Mr Victor Ndukauba, made the presentation of the report during the launch of the 17th edition of the report and unveiling of Optimus, Afrinvest’s digital investment app, in Lagos on Wednesday night.
The occasion also marked the announcement of Afrinvest’s new subsidiaries and expansion of its leadership team as well as the unveiling of a new logo.
The report’s assessment of CBN’s financial stability indicators showed that industry liquidity and non-performing loan ratios both improved by 130 basis points(up) and 75bps(down), respectively, to 42.6 per cent and 4.95 per cent.
Although, the Capital Adequacy Ratio at 14.1 per cent underperformed the June 2021 level by 140bps, all the indicators beat the prudential guideline limits of 30 per cent(LR), five per cent(NPLs), and 13.0 per cent(CAR), respectively, despite myriads of challenges in the business environment.
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The report said the improvement was expected to be sustained over the coming years.
It stated that in increasing its developmental financing role, especially in agriculture financing, the CBN risked crowding out banks and private sector financing, which were more effective in de-risking the sector and incentivising growth without moral hazards.
It stated, “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 has grown by a compound annual growth rate of 1.9 per cent compared to 2.3 per cent CAGR for the population.”
“For banks, this reality means that upscaling would be less efficient than in an economy where growth exceeds population expansion.”
The report recommended that critical reforms must be undertaken as a matter of urgency to avoid a repeat of the negative trends seen in the last decade.
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