Agusto & Co. Limited, a pan-African credit rating agency and business information provider, has projected loans in the banking sector to rise by 16.5 per cent.
It disclosed this in its annual ‘2022 Nigerian banking industry report’, which provided a comprehensive review of Nigeria’s banking industry and the near-term expectation for the Industry.
It said, “Agusto & Co. notes positively the resilience shown by the Nigerian banking industry in FY 2021, as the industry’s loan portfolio grew by 21 per cent despite the weak economy and regulatory constraints.
“Notwithstanding the prevailing global supply constraints, the Russian-Ukraine crisis and insecurity challenges that continue to hamper food and crude oil production in Nigeria, we anticipate a 16.5 per cent year-on-year loan growth in 2022 as more banks now have a better understanding of the macroeconomic headwinds.”
It stated that traditional sectors such as oil and gas, manufacturing, general commerce and agriculture sectors were expected to drive the loan growth given the backward integration initiatives of obligors, the intervention activities of the Central Bank of Nigeria and the import-dependence nature of the Nigerian economy.
While the arbitrary cash reserve deductions and foreign exchange illiquidity would remain limitations to the growth of the Industry’s loan portfolio, it noted that more banks were now favourably disposed to accessing the differentiated cash reserve requirement window to reduce the value of sterile restricted funds with the CBN.
It stated that, “In the near term, we believe the industry’s asset quality will remain acceptable, with the impaired loan ratio hovering around six per cent as at 31 December 2022.”
In our view, a proactive tightening of controls around loan origination and intensified loan monitoring will moderate the impact of the tough operating climate on the loan portfolio.”