2023 Banking Industry Report

Overview of the Report

The 2023 edition of the annual report provides a comprehensive review of Nigeria’s banking industry (“the Industry”) and the near-term expectations and outlook for the Industry.

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. Innovation and malleability of the banks as reflected in the transition to the financial holding company structure and upscale of banking license by some players have upheld the Industry. Collaborations with financial technology companies (FinTechs), domestic and international development finance institutions (DFIs), among other partnerships have also supported the Nigerian banking industry.

Agusto & Co. notes 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. Banks have backed this growth with additional investment in credit risk management and capital raising exercises. Following the inauguration of President Tinubu, the new administration has implemented several reforms aimed at reversing prevailing macroeconomic imbalances. Agusto & Co. believes that the reforms including the removal of the petrol subsidy, exchange rate harmonisation, tax reforms and restoration of a methodological framework for calculating the cash reserve requirements (CRR) provide growth opportunities for the Industry. For instance, we believe many banks will take advantage of rising liquidity following the eradication of arbitrary CRR debits to grow the loan book, especially since the working capital needs of businesses continue to rise given the weakening domestic currency and other inflationary pressures. Agusto & Co expects that new loan disbursements will largely flow to traditional sectors including manufacturing, oil and gas and general commerce amongst others and resilient players given the volatile operating terrain. Nascent sectors such as renewable energy, health and gender-based businesses will also continue to gain according to Agusto & Co. Nevertheless, some pressures in asset quality are expected, considering the lower consumer purchasing power and dwindling margins of some industries. However, the non-performing loan ratio of the Industry is expected to remain below 5% as at FYE 2023 as many banks leverage their past experiences from recessions and the pandemic to navigate this stressed cycle.

Agusto & Co.’s 2023 Banking Industry Report include an analysis of the following;

  • Impact of the ongoing macroeconomic reforms on the Nigerian banking industry
  • Size of the Nigerian banking industry
  • Recent trends in the Industry
  • A review of the regulatory environment
  • Detailed review of the Industry’s financial condition
  • Analysis of the financial condition of the merchant banking segment
  • A review of the financial condition of the non-interest banks
  • Agusto & Co.’s outlook for the Nigerian banking industry.

Key benefits of the report include:

  • An assessment of the current structure of the banking industry
  • A review of the ongoing macroeconomic reforms’ impact on the Nigerian banking industry
  • A comprehensive review of the financial strength of the Nigerian banking industry, the merchant banking segment and the non-interest banks.