Nigerian banks to meet govt over retrenchments - CNBC Africa

Nigerian banks to meet govt over retrenchments

Western Africa

by CNBC Africa Reporter 0

Nigerian banks to meet govt over retrenchments. Photo: Pixabay.

As Nigeria continues to feel the pinch of the economic downturn, government is planning to hold conciliatory meetings with the banks in the next month, as lenders steadily carry out retrenchments.

"It’s not all the banks in the sector and they have had quite a bit to contend with this year, weak income generation, rising NPLs and market pressure to maintain margins have sort of caused these cost cutting measures and unfortunately for those involved, resulted in the restructuring we have seen across some of these banks," says Jolomi Odongharo, Banking Analyst, Meristem Securities.

Odongharo says the restructuring process has not been localised to any specific tiered banks and are all affected, but market pressure has resulted in what is being seen in the sector.

"Across banks, NPLs (non-performing loans) are a major issue, especially this year and with the growth we have seen in non-performing loans, even if we take out the outliers like the first banks, it is still a massive rise from NPLs," said Odongharo.

This means that profitability will be constrained, credit growth will also be constrained because significant NPLs mean a bank is carrying debt, Odongharo also says not to expect write-offs but rather remediation.

"Which means that NPLs might stay at a higher level, and with new NPLs coming into the system it’s a major issue for banks to contend with."

"Nigerian banks are well capitalised and I can see even capital ratios growing this year, so overall the soundness of that industry is good - it's just that there are pressures that they need to contend with through the year."