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The structure of bank’s credit in the first half of 2017 indicated that credit of short-term maturities remained dominant, according to the Central Bank of Nigeria (CBN).
Credit maturing within one year accounted for 43.7 percent, indicating a decline, compared with 46.0 per cent at end of June 2016. The medium-term (greater or equal to one year and lea than three years) and long-term (3years and above) maturities stood at 18.4 and 37.9 per cent, respectively, compared with 18.1 and 35.9 per cent at the end of the corresponding period of 2016.
Similarly, deposits of less than one-year maturity constituted 96.1 per cent (of which 74.9 per cent had maturity of less than 30 days), compared with 95.3 per cent at the end of the first half of 2016. Further analysis showed that the medium and long-term deposits constituted 1.0 and 3.0 per cent, respectively, compared with 1.8 and 2.9 per cent at end-June 2016. Consequently, loan to deposit ratio fell to 79.0 per cent at end June 2017 from 80.5 per cent at end-June 2016, and reflected significant holdings of government securities by banks as claims on the core private sector also fell.
Although marginal improvements were observed with the long-term deposit and credit structure during the review period, the continued miss-match of deposits and loans structure remained a threat to stability of banks and their ability to create long-tenored assets.
The banking sector exhibited weaker competition among players in the first half of 2017. The market share of the largest bank, with respect to assets and deposits, stood at 14.8 and 12.9 per cent, respectively, compared with 13.5 per cent and 12.8 per cent at the end of the first half of 2016. Nineteen smaller banks have market shares ranging from 0.08 to 11.7 per cent of assets and 0.02 to 12.9 per cent of deposits. The Herfindahl-Hirschman Index (HHI)2 (a commonly accepted measure of market concentration) of the industry rose to 783.65 and 737.66 for assets and deposits from 751.17 and 733.37 in assets and deposit, respectively in the first half of 2016.
The concentration ratios of the six largest banks (CR6) were 60.11 (HHI=3,612.97) and 57.1 per cent (HHI=3,254.75) in assets and deposits respectively, compared with 44.89 (HHI=2,011.83) and 51.89 per cent (HHI=2,692.07) at the end of the first half of 2016. This suggests that oligopoly is possible in the market.
HOPE MOSES-ASHIKE
