The performance of the Nigerian banking industry is largely dependent on the macroeconomic environment, as well as the performance of the top five banks, a report has stated.


The Banking Industry report by Agusto & Co. obtained wednesday also showed that about 47 per cent of the banking industry’s impaired loans are collectively held by the top five banks.

The top five banks in Nigeria are Zenith Bank Plc, Guaranty Trust Bank Plc, FirstBank Nigeria Limited, United Bank for Africa Plc, and Access Bank.

According to the report, the impaired loans were mainly in the oil & gas, transport & communication sectors, accounting for 37 per cent and 11 per cent respectively of the industry’s total classified loans.

In the oil & gas space, also disclosed in the banking sector report, the top five banks accounted for 60 per cent of the loans disbursed to this sector, “which heightens concentration risks.”

A breakdown of the oil and gas sector loan disbursement showed that the top five banks granted over 66 per cent of the banking industry’s total exposure to the upstream; 64 per cent of total exposure to the midstream and 73 per cent of the total loans granted to the downstream.

“On an average, each of the top five banks have disbursed over N500 billion to the oil & gas sector. This makes them vulnerable to the financial performance of this sector which has been enfeebled by global circumstances.

“Of the impaired loans to oil & gas sector (about 37%), the top five banks account for 77 per cent of these impaired loans. These loans largely granted in foreign currencies were further exacerbated by the volatility of the domestic currency.

“There have been arguments that given the sheer size of the top five banks’ loan book, they will continue to account for a sizeable chunk of the banking industry’s impaired loans especially in periods of weak macroeconomic fundamentals,” the report stated.

The top five banks also account for 57 per cent of the industry’s total assets.
The last two years saw intense weakening of the macroeconomic fundamentals against the backdrop of lower crude oil prices – Nigeria’s major revenue source – and the unorthodox demand management in the foreign exchange market.

“However we believe that these industry leaders need to strengthen risk management framework particularly in the areas of concentration risk, early warning signals and enhanced oversight governance.

“The undue concentration to oil and gas could become the Achilles heel for the top five banks. Crude oil, like most other tradable commodities has boom and bust cycles which are quite difficult to predict,” the report stated.

According to Agusto & Co, to mitigate risks in the industry, Nigerian banks will need to adopt time tested values.

“In December 1863, Hugh Mc Cullock, then Comptroller of the currency and later Secretary of the Treasury in the US, addressed a letter to all national banks. In the letter he said, “distribute your loans rather than concentrate them in a few hands,” the report stated.

It warned that concentration risks in oil and gas (downstream) and margins trading (equities) led to the 2008/2009 banking crisis in Nigeria which led to the nationalisation of some of the most vulnerable institutions and the bailout of the industry.

SOURCE: https://brandspurng.com/top-five-banks-account-for-47-of-industrys-impaired-credits/

FTC.

**Minions Laff** Buhahahahahaha Ramsbottomm.

Ok

That's how they forked out a billion dollars for Etisalat. When their debtors fail to deliver its the people that suffer the economic downturn. They should be penalised for irresponsible behaviour.

T

Una headache!

Ok

.

Reading this report, something struck me, though I might be wrong. But why is all the loans concentrated mainly on the oil and gas sector. What happened to the agricultural sector of the economy. The banks shld be and the forefront of sponsoring agricultural programs, but for where.... In Naija, all they want is quick money.

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Rich4god:
Reading this report, something struck me, though I might be wrong. But why is all the loans concentrated mainly on the oil and gas sector. What happened to the agricultural sector of the economy. The banks shld be and the forefront of sponsoring agricultural programs, but for where.... In Naija, all they want is quick money.

Rich4god:
Reading this report, something struck me, though I might be wrong. But why is all the loans concentrated mainly on the oil and gas sector. What happened to the agricultural sector of the economy. The banks shld be and the forefront of sponsoring agricultural programs, but for where.... In Naija, all they want is quick money.

ya all listen to this man, he has the words of eternal life

Rich4god:
Reading this report, something struck me, though I might be wrong. But why is all the loans concentrated mainly on the oil and gas sector. What happened to the agricultural sector of the economy. The banks shld be and the forefront of sponsoring agricultural programs, but for where.... In Naija, all they want is quick money.

banks are businesses, their goal is to make as much money as quickly as possible....and it seems the oil and gas sector is the sector that guarantees that the most.

ultron12345:
banks are businesses, their goal is to make as much money as quickly as possible....and it seems the oil and gas sector is the sector that guarantees that the most.

I know banks are business. But in reality, that's not how banks shld operate. Banks are supposed to finance the industrial growth of a nation, but in Nigeria, the reverse is the case. Most banks in Nigeria won't give a loan of #1M to a man that is starting a business, even when the man have about#5M in collateral. Then, how will the small scale industry grow. Even all these too notch company they give loans to cos of their size, most can't even pay back e.g etisalat and somany other oil companies can't pay back their loan. What then is d sense in it.

If banks we're to have given loans to rice farmers when the FG shut the border to rice, by now, the returns could have been coming in big.

Hey mods... How can you bring such a topic on FP and still left it for Muslims only.... Na wa o

https://www.nairaland.com/4071341/opposition-sukuk-playing-dog-manger

Rich4god:
I know banks are business. But in reality, that's not how banks shld operate. Banks are supposed to finance the industrial growth of a nation, but in Nigeria, the reverse is the case. Most banks in Nigeria won't give a loan of #1M to a man that is starting a business, even when the man have about#5M in collateral. Then, how will the small scale industry grow. Even all these too notch company they give loans to cos of their size, most can't even pay back e.g etisalat and somany other oil companies can't pay back their loan. What then is d sense in it.

If banks we're to have given loans to rice farmers when the FG shut the border to rice, by now, the returns could have been coming in big.

What sort of lie is that, that bank won't give Loan when someone is willing to give collateral worth 5 times the loan, Oga, stop lieing, Haba!!!!!

What collateral will the farmers bring, no business plan, no plan on how to repay, no feasibility study, most can't even separate business money from personal money......cases like this are handled by microfinance banks.

Big companies are considered safer borrowers, loaning dangote cement N100M and loaning 100 rice farmers N1M each, which do you think is safer. You used etisalat as an example, this is not the first time etisalat has collected loans, they have collected loans before and successfully paid back, don't mtn, GLO and the rest pay back loans.....what actually happened in the etisalat case was that etisalat collected a loan in dollars when a dollar was less than N200 and was to pay in dollars when a dollar was almost N500, what caused the crash of etisalat was the Nigerian economy, if the dollar remained at about N200, I can bet you that etisalat would have successfully repaid that loan.

It's not that banks don't want to lend to the agricultural sector, the problem is the credibility of those in the agricultural sector. Olam and wacot operate huge rice farms, dangote and bua operate sugar cane plantations, okomu and Presco have huge plantations, these companies are all in the agriculture sector, banks will not have any problems lending to these companies because they are they are safer.......where agricultural lending becomes a problem is lending to small scale independent farmers like Papa iyabo who farms cassava on 1 plot of land.

Digital Transformation and Digital disruption is almost here in Nigeria, the banks will soon sit up or else they won't know what will hit them soon, in western nations, pay pal can disburse loans in just secs, who is waiting for the banks? smh

Almost two hours, this thread is still on one page but if it's hausa vs igbo or youruba muslims and christians, this page will almost be 10 pages now. chai we go school for this country so?

Rich4god:
I know banks are business. But in reality, that's not how banks shld operate. Banks are supposed to finance the industrial growth of a nation, but in Nigeria, the reverse is the case. Most banks in Nigeria won't give a loan of #1M to a man that is starting a business, even when the man have about#5M in collateral. Then, how will the small scale industry grow. Even all these too notch company they give loans to cos of their size, most can't even pay back e.g etisalat and somany other oil companies can't pay back their loan. What then is d sense in it.

If banks we're to have given loans to rice farmers when the FG shut the border to rice, by now, the returns could have been coming in big.

Where do you think banks get their funds from? Investors and Customers.

They will have to protect and pay interest on those funds, so they target the most stable and profitable industries. i.e oil and gas.

This is where the government can intervene, give funds to banks at low interest rate with conditions.

The bank marketers get kick back frm those oil and gas people they giv loans to