Group Managing Director, Afrinvest West Africa, Ike Chioke.
A new report by Afrinvest West Africa Limited has revealed that the 2019 elections present the best chance to reset governance and build new growth levers that would put the country’s economy on a path to prosperity.
The report titled, ‘Nigerian Banking sector Report 2018’, with the theme: ‘An Economic Agenda for A New Government’, the report noted that implementing structural reforms is imperative to building a strong and sustainable foundation for growth.
Speaking at the pre-launch press conference in Lagos on Tuesday, Group Managing Director, Ike Chioke, posited a yearly double-digit growth, which is required for sustained employment creation and poverty eradication is not impossible if critical reforms are passed. Chioke reiterated the need for wide scale infrastructure deployment to drive substantial and sustained improvements in the quality of human capital through investments in education and health.
He said this is essential to effectively utilise physical capital and achieve strong economic performance.“Overall, our assessment of performance so far reveals that the economy continues to trail its long-term growth performance and levels seen prior to the recession. Indeed, more worrying is the fact that growth remains below population growth, which indicates that people have grown poorer on average – this trend will persist into 2020. In our opinion, breaking out of this cycle requires structural reforms, without which investments and growth will remain poor. ”
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On the state of the banks, he said the banking sector proceeded into 2017, on the back of successive years of growth in revenues and earnings. With economic conditions deteriorating, the expectation was that the industry was entering a low-growth phase when strong Return on Equity (ROE) performance of the past would drop. However, the industry remained resilient in the face of significant pressure,” he said.
He said that banks’ ROE rose as revenue and profits accelerated, while banks’ capitalization was stronger, with average capital adequacy ratio rising to 20 per cent in 2017 from 18.4 per cent in the previous year.However, despite improving micro-economic fundamentals, banks’ asset quality deteriorated, further in 2017, with industry non-performing loans increasing to 9.3 per cent.
Chioke said the financial performance of the sector was driven by the tight monetary policy of the Central Bank of Nigeria (CBN), which with its overreaching responsibility for price stability, kept rates high and system liquidity low, by conducting consistent open market operations.
“Consequently, at the start of the years, banks were able to lock in high yield investments, which crowded out private sector borrowing, while in the latter part of the year, market volatility allowed some operators to record substantial trading gains,” he said.However, the report presents an analysis of current economic challenges and proposes structural reforms as the key to building a strong and sustainable foundation. It offers critical insights into how we can attain annual double-digit growth by substantial, sustained efforts across seven critical areas of development including human capital development, power, oil & gas, trade, transport and infrastructure, security and good governance.
Source: G Business
