Agusto & Co. Limited, the pan-African credit rating agency and the foremost business information provider has released its 2022 Nigerian Banking Industry Report. The 2022 edition of the annual report provides a comprehensive review of Nigeria’s banking industry and the near-term expectation for the Industry.
Agusto & Co. notes positively the resilience shown by the Nigerian banking industry in FY 2021, as the Industry’s loan portfolio grew by 21% despite the weak economy and regulatory constraints. Notwithstanding the prevailing global supply constraints, the Russian-Ukraine crisis and insecurity challenges that continue to hamper food and crude oil production in Nigeria, we anticipate a 16.
Nigeria’s banking industry remains well capitalised relative to the business risks undertaken and should remain so in the near term. In preparation for the full implementation of Basel III and based on the scheduled growth plans, we expect an increased appetite for perpetual bond issuances which qualify as additional tier 1 capital. We also believe that some banks will raise common equity tier 1 capital that will keep the Industry’s capital adequacy ratio above 17%.
In FY 2022, Agusto & Co projects a decline in the Industry’s net interest spread as the prevailing low yields on government securities, which dominate the Industry’s investment securities, will moderate the impact of the uptick in interest rates. However, we anticipate an increase in the net earnings driven largely by higher trading income and electronic banking fees.
Our financial prospects for Industry are largely stable in the near term. We adjudge the Industry as resilient and the current trend of banks adopting the holding company structure to diversify into other financial services segments while exercising control over subsidiaries should support the Industry’s profitability.