Wednesday, May 20, 2020 06:50 AM / by Debtors Africa/ Header Image Credit: EcoGraphics
The Nigeria banking sector faced harsh challenges in 2018 as growth in the gross domestic product ("GDP") stalled in the face of falling Inflation and tighter monetary policy. GDP in 2018 grew by a sluggish +1.93% while Inflation closed the year at a modestly high +11.44%. But not only did GDP growth rate hit a large speed bump; the unemployment rate equally soared to scary heights as the industry lost most of its steam. The unemployment rate rose by +23.1% in Q3 2018 as against +18.8% in the same quarter a year earlier. Underemployment rate equally rose to +20.3%. The combined unemployment and underemployment rate for Nigeria in 2018 was therefore +43.4%; easily one of the worst in Africa.
With high domestic Lending rates, local investment faltered and the high yields on the federal government ("FGN") bonds and bills crowded out private sector access to the money and capital markets in the year. The rise in domestic interest rates led to lower lending portfolios and a rise in the proportion of non-interest income to total bank income in 2018. Higher interest rates also resulted in banks being able to increase customer deposits, although most of the new gains in retail deposit accounts are better associated with greater financial inclusion than retail customers searching for higher-yield savings assets.
As a group the banks had to cope with the following issues in 2018:
On the Bright Side
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