Leading Advisory firm, Afrinvest Limited, has said the total loans in the Nigerian banking industry is expected to hit N24.4 trillion by the end of 2021 due to the growth in loans driven by the 65 per cent Loan-to-Deposit Ratio (LDR) policy of the Central Bank of Nigeria (CBN).
Its Group Managing Director, Ike Chioke, stated this during the launch of its 15th Nigerian Banking Sector Report, entitled “The Insecurity Challenges of Poverty” in Lagos. Chioke, noted that with the impact of the COVID-19 pandemic on global economies, Nigeria is expected to record the worst contraction since 1983, adding that a modest recovery is expected in 2021 following reduced output cuts and sustained improvement in the non-oil sector. According to him, the nation’s revenue has historically been underperforming for four years, stating that a projection of N3.8 trillion in revenue is expected as against the budgeted revenue of N5.4 trillion at the end of 2020.
“When looking at the components of the budget alongside oil production, prices and exchange rates, we are worried with the revenue target and with our debt ratios accelerating due to record spending, we might not be able to hit our target and this would mean the debt profile of our country will go higher which does not augur well”, he explained.
Reviewing the performance of the banking industry, Chioke said the total assets expanded strongly due to growth in deposits and is expected to hit N54.3 trillion at the end of 2020 and N57.8 trillion at the end of 2021.
He, however, expressed worry over the earning profile of the industry, stating that Nigerian banks are struggling to meet the CBN’s policies on LDR.
“The growth in loans has been driven by CBN’s minimum 65 per cent LDR policy and we are likely to see industry total loans hitting N23.2 trillion at the end of the year and N24.4 trillion at the end of 2021.
Looking at the report, Tier-1 banks, barring Zenith Bank (67.4 per cent), are struggling to meet up with the apex bank policy on LDR while NPLs have remained broadly stable following the CBN’s forbearance and rapid loan growth in Tier 1 and Tier 2 banks”, he said.
While citing issues ranging from insecurity, poverty and rapid population growth in the Nigerian economy, the Afrinvest GMD, urged the Federal Government to aggressively widen economic opportunities each year by incentivising private sector investments into the healthcare and education sectors, attract private investments into agriculture through incentives, accelerate industrialization to boost growth, employment and trade.
“The digital economy is critical to creating jobs of the future and to ensure global competitiveness, there has to be expansion of the broadband penetration and establishment of a tech ecosystem which will attract global tech companies and automate government’s operations and processes”, Chioke added.