The reduction in deposits as a result of increased customer interest in Treasury Bills (T-Bills) has hindered lenders from creating risk assets.
Hitherto, lenders in Africa’s largest economy were growing assets even at the depth of the economic recession, thanks to the partial devaluation of the currency that saw an increase in dollar-denominated assets.
The cumulative total deposits from customers of the 12 lenders that have released 9 months 2017 results increased by 1.0 per cent to N16.53 trillion.
This compares to the period to September 2016 when deposits from customers surged by 31.54 per cent or N4 trillion to N16 trillion.
Meanwhile, the cumulative total assets of the 12 lenders increased by 5.50 per cent to N28.45 trillion in September 2017 from N26.96 trillion as at September 2016.
This compares with a 21.23 per cent, 14.18 per cent and 10.52 per cent year on year growth in assets as at September 2016, 2015 and 2014, data compiled by BusinessDay shows.
“Due to contraction in deposit mobilization banks have been unable to create sufficient assets,” said Ayodeji Ebo, managing director and chief executive officer of Afrinvest Securities Limited.
“Also, the increasing interest on T-Bills that has crowed out deposits has limited banks’ ability to create risk assets,” said Ebo.
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The 12 banks include Zenith Bank Plc, Access Bank Plc, Diamond Bank, Fidelity Bank, Guaranty Trust Bank (GT Bank) Plc, Stanbic IBTC Holdings Plc, First Bank Holdings Plc, United Bank For Africa Plc, Union Bank Plc, Sterling Bank Plc, Wema Bank Plc and Unity Bank Plc
Drilling down into the figures, Guaranty Trust Bank (GT Bank)’s total assets increased by 3 per cent to N3.21 trillion in September 2017 from N3.11 trillion the previous year
Access Bank’s total assets grew by 2 per cent in the period under review to N3.54 trillion as against N3.48 trillion in September 2016. First Bank Holdings Plc’s total assets increased by 2 per cent to N4.86 trillion in September 2017 as against N4.76 trillion in 2016.
Of the tier one lenders, only Zenith Bank recorded double-digit growth in assets.
In his emailed response, Bolade Agbola, Analyst and CEO of LAM Agro Consult Limited said, “We have just exited a recession characterized by 5 quarters of negative growth. Our GDP actually dropped to about $405b as at 2016 from $510b recorded when it was rebased in 2013. The shrinkage in economic activities due to a significant drop in petrodollar inflow, devaluation, inflation, galloping unemployment must have taken its toll on the banking system with drop-in banking activities, savings and investments.”
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Analysts are of the view that more retail customers that would have left their unutilized deposits in their accounts now have more investment options such as fixed-income securities offering higher interest rates to generate returns on such idle cash.
Nigeria raised N119.9 billion at a Treasury bill auction on November 15 after allocating almost 90 per cent of the debt to the longer maturities, traders said.
The central bank sold N107.93 billion of one-year debt at a rate of 15.60 per cent, N43.26 billion more than it had initially offered to sell in that maturity.
Investors bid as high as 18.23 per cent for the one-year paper.
Ayodele Akinwumi, head of research at FSDH Merchant Bank says the devaluation of the currency as a result of the adoption of a flexible exchange rate in June 2016 led to the growth in some dollar-denominated assets that year.
“Banks that lent to International oil companies and foreign Telecoms firms could have made money when they converted the foreign assets into local currency as the currency had weakened that year,” said Akinwumi.
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