Agusto & Co. .Limited, a pan-African credit rating agency has said that the non-performing loan ratio of the banking industry is expected to remain below 5% at FYE 2023 as many banks leverage their past experiences from recessions and the pandemic to navigate this stressed cycle
The agency stated this in a report in its 2023 Nigerian Banking Industry Report tagged ‘A Resilient Industry Navigating a Volatile Operating Terrain’ seen by TheWitness.
The report noted that the Nigerian banking industry has continued to be resilient despite the raging macroeconomic and regulatory headwinds that have constrained performance in the last three years.
Industry’s loan book: Agusto & Co. noted that the industry’s loan book rose by 27% in FY 2022, spurred by increased activities at the differentiated cash reserve requirement (D-CRR) window, higher deposit base, and naira devaluation.
It added that banks have backed this growth with additional investment in credit risk management and capital raising exercises.
According to the report, following the inauguration of President Tinubu, the new administration has implemented several reforms aimed at reversing prevailing macroeconomic imbalances.
It noted that the agency’s expectation for performance by the Nigerian banking industry is positive.
The report stated that with the reversal to normalcy concerning CRR debits and foreign currency illiquidity, many banks have witnessed a rise in available funding for risk asset creation and it believes this would be exploited to boost interest income and ancillary earnings through the treasury function.
The report noted, however, that the industry is not entirely insulated from the vagaries of the Nigerian economy and it expects inflationary pressures to bloat operating expenses in the near term.
The report stated that as the competitive landscape is changing the holding company structure is gaining more prominence with banks seeking to diversify into new businesses such as pension and asset management while responding to the disruption by FinTech companies.
