Nigerian Banking Sector To Worth $168bn By 2015—KPMG

By Babatunde Akinsola

International audit firm KPMG in a report has stated that the Nigerian Banking sector would be worth over $168bn by 2015, from the $117bn in 2011

In a Customer Service Survey CSS for 2013, it revealed that only 20% of Nigeria’s large population was banked, while two-thirds of that figure had never been banked.

Nigeria’s financial sector was hurt by the global financial and economic crises, but the outgoing Central Bank governor Sanusi Lamido Sanusi has taken measures to restructure and strengthen the sector to include imposing mandatory higher minimum capital requirements.

Yet the nation’s 20 banks with almost 6000 branches are still concentrated in urban areas. It noted that Automated Teller Machines ATM though also concentrated in city centers had become a growing channel.

Eight in 10 customers surveyed use the ATM and nearly two thirds of these people make weekly withdrawals and balance enquiries using the channel. Although fewer people used Internet banking, point of sale, telephone banking and mobile banking in that order.

The report noted the efforts of the Asset Management Company AMCON in purchasing toxic stocks and helping stabilizing troubled banks.

The development was largely responsible for rating agency Standard & Poor’s upgrade of the sector in 2012 to a positive outlook for reasons of improved assets quality, capitalization and corporate governance.

Oil-rich Nigeria has been hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management but in 2008 began pursuing economic reforms. Nigeria’s former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of budgetary revenues.

Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and S$1bn credit from the IMF, both contingent on economic reforms. Nigeria pulled out of its IMF programme in April 2002, after failing to meet spending and exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club.

In November 2005, Abuja won Paris Club approval for a debt-relief deal that eliminated uS$18 billion of debt in exchange for uS$12 billion in payments – a total package worth $30 billion of Nigeria’s total uS$37 billion external debt.

Since 2008 the government has begun to show the political will to implement the market-oriented reforms urged by the IMF, such as modernizing the banking system, removing subsidies, and resolving regional disputes over the distribution of earnings from the oil industry.

GDP rose strongly in 2007-11 because of growth in non-oil sectors and robust global crude oil prices.

President Jonathan established an economic team that includes experienced and reputable members and announced plans to increase transparency, diversify economic growth, and improve fiscal management.

Lack of infrastructure and slow implementation of reforms are key impediments to growth. The government is working toward developing stronger public-private partnerships for roads, agriculture, and power.

However uncertainty in the political terrain continues to trouble Africa’s most populous nation.

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Reporting by Babatunde Akinsola in Lagos, Nigeria.