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Nigeria Commercial Banking Report Q3 2008Published by: Business Monitor International Published: Sep. 17, 2008 - 39 Pages Table of Contents
AbstractOver the last year, the crisis in the inter-bank market, and the soaring prices of oil and other raw materials,tended to obscure several other important trends. In most of the developing world (i.e. the vast majority ofthe countries whose banking industries are surveyed by BMI), lending has been growing quickly. In manyemerging markets, inflationary pressures have been boosted by a rapid increase in credit. In a number ofemerging markets, macro-economic imbalances are evident.The figures on the tables above provide a snapshot of the banking sector in Nigeria and the changes thathave taken place within it over the last year. To place the figures in context, it may be useful to bear inmind certain aspects of the 59 countries whose banking sectors are currently surveyed by BMI. Acrossthis sample, the median growth in assets in local currency terms was 21.3% (in Colombia). The medianloan growth was 21.6% (in India). The median growth in deposits was 17.9% (in Brazil). On their own, the ratios of loans to deposits, assets, and GDP mean little: however, they can provideuseful hints when combined with other data. Across the 59 countries, the median loan/deposit ratio is92.3% (in Greece). The median loan/asset ratio is 56.0% (in Poland). The median loan/GDP ratio was63.9% in India. From Q308, we have included a new section that examines the risks associated with each country’sbanking sector in a new way. We have essentially sought to ask this question: to what extent will thebanking sector likely need to source funding from banks in the rest of the world over the course of 2008.Given that the answer is not necessarily, on its own, meaningful, we have looked at other key issues suchas the size and recent movement in the loan/deposit ratio, macro-economic developments and recentmovements in financial markets. Booming oil prices - and, in Iran at least, highly inflationary monetary policies - have led to a surge inbank lending in much of the Middle East and North Africa, as well as Nigeria. It is not clear that all of thislending has been prudent. Nevertheless, the massive current account surpluses being achieved by many ofthe countries in the region indicate that - quite unlike Southeast and East Asia in 1997-8, for instance - thecurrencies are undervalued. There is no reason why the boom should stop anytime soon. The Middle Eastand North Africa should, collectively, continue to be a significant supplier of capital to the rest of theworld. However, in part because of the relative underdevelopment of financial services and banking inmost countries, relatively little of this money should come directly through the local banks. As in previous reports, we include a SWOT analysis for Nigeria. Relative to its peers in all other countriessurveyed by BMI, the banking sector of Nigeria is something of an enigma. The sector has beenrecapitalised. The quantity and quality of official information that is available has been improvingmarkedly over the last few years: one should assume that the same is true of the efficiency with which thesector is regulated. The banking sector is an obvious beneficiary of the oil boom, which should continue.Lending has been growing more rapidly in Nigeria than almost anywhere else. Against this, it is not clearwho, exactly, has been borrowing from the banks. What is apparent is that almost all the lending has beento borrowers who are outside the four areas of the real economy that have been identified by the CentralBank as being priorities. It is also manifest that Nigerian households are too poor and/or too distrustful ofthe banks to use them. Until the banking sector becomes a lot larger and a lot more transparent, it isdifficult to see that a mass “middle class” of consumers will really emerge in Nigeria - in spite of the hugerevenues being garnered through the sale of oil. Nigeria’s overall CBBER is 53.9. Within the limits to potential return, banking market structure scores farmore highly than does country structure - with scores of 61.3 and 46.8 respectively. In essence, the future(and recent past) growth is so great that this goes some way to overcome the well-known structuralproblems for which Nigeria is notorious. In terms of the risks to the realisation of potential returns, thebanking and country elements are more or less evenly weighted - with scores of 50.0 and 50.5respectively. Get Full Details About This Report >> |
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