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By now the banking industry operators should be bidding farewell to the year ending 2016 with its attendant challenges while looking forward to a better operating environment in the incoming year 2017.
Indeed the year 2016 financial year has been a challenging year for both the Nigerian economy and the banking industry specifically. The year commenced with a persistent fuel scarcity across the country. The impact on business was further worsened by a grossly inadequate foreign exchange supply for imports of necessary inputs and machinery. Inflation also took its toll on business; moving up to an all-time high of 18.3 percent leading to a noticeable weakened purchasing power of consumers and a significant reduction in retail volumes in the economy.
Banking sector in 2016 was faced with challenges emanating from foreign exchange income, foreign exchange-driven loan book growth, deterioration in asset quality due to foreign exchange depreciation and flagging operating environment, and downward pressure on capital ratios.
There were times the banking public was overwhelmed with anxiety over rumours of failing banks but the Apex bank intervened to restore confidence in the sector. This was as the CBN constantly declared that banks were safe and sound and that no Nigerian bank was in distress.
One of the visible events of 2016 was the reconstitution of the board and management of Skye bank plc by the Central Bank of Nigeria (CBN).
While addressing the media in July 2016, Godwin Emefiele, governor of CBN said proactive moves had become unavoidable in view of the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios, which had culminated in the bank’s permanent presence at the CBN lending window. In particular, Skye Bank’s liquidity and non-performing loan ratios had been below and above the required thresholds, respectively, for quite a while.
However, as the macroeconomic challenges persisted, the banking industry adopted various strategies to remain afloat.
Consequently, some of the banks cut their staff salaries and other emoluments, downsized their workforce and place the surviving staff on a target, and above all engaged in deposit mobilisation.
However, the challenges of 2016 offer huge banking opportunities which the banks can take advantage of by developing more constructive strategies to increase their share of the non-oil sector in their loan portfolios.
Tunde Mabawonku, Chief Financial Officer, Wema Bank plc, Taiwo Oyedele, PwC head of Tax and regulatory services West Africa Tax Leader, and Olutola Oni, analyst at WSTC Financial Services, all agree that things will pick up from the second quarter of 2017.
Mabawonku said banks will need to be more creative and innovative as they respond to the expected vagaries and volatilities in 2017.
Oni expects the pressure on capital ratios and the need to raise capital in order to create buffers to macro headwinds to continue in the industry in 2017.
HOPE MOSES-ASHIKE
