The Nigerian banking industry saw a significant performance boost in 2023, driven by the devaluation of the Naira and rising interest rates, according to Vetiva Capital Management Limited. The finance and investment analysis firm predicts this growth trend will continue into the 2024 financial year.
Vetiva said in its “FY’24 SSA Banking Outlook” released on Friday, that banks might earn a 15.75% interest on their assets through the SDF window, a significant rise from the previous 11.75%.
Vetiva based its forecast on current economic conditions and strategic initiatives banks are likely to implement. According to the Banking Outlook report, consumer deposits climbed by 40% in 2023, showing a shift in customer behaviour and confidence in the banking system.
Read Also:
The study also found significant gains in FX revaluation across the banks covered. Vetiva noted that the profits were due to positive net positions in foreign currency-denominated assets and the increase in their balance sheets caused by devaluation.
As of the first nine months of 2023, the report revealed an average 95% year-on-year increase in gross earnings and a 162% year-on-year increase in net profit. According to Vetiva, rising interest rates facilitated the increase in interest income.
“Despite these challenges [rise in the cost of funds], the overall performance of banks on the NGX has been nothing short of impressive, buoyed by the proactive policies implemented by the new administration,” the report read in part.
Vetiva believes that the new financial landscape has set the stage for a banking boom in 2024, marking a new era of prosperity in the Nigerian banking industry. “Strategic core banking initiatives will be key drivers in the anticipated 15.75% growth,” the report added.
