Nigerian banks operating costs higher than other countries — MPC member
A member of the Monetary Policy Committee, Adeola Adenikinju, has highlighted the urgent need for Nigerian banks to reduce their operating costs in order to improve their profitability.
The Central Bank of Nigeria released this in his personal statement made at the last MPC meeting.
In his report, he said, “Interest margins to total operating income declined from 58.1 per cent in March 2023 to 50.5 per cent in April 2023.
“However, operating cost to operating income declined marginally from 70.6 per cent to 70.5 per cent between March and April 2023.
“The high operating cost environment of the banking sector should be addressed. In other climes, the ratio is 23.5 per cent in Turkey, 50.6 per cent in Brazil, 41.0 per cent in Malaysia, 62.0 per cent in South Africa, 43.2 per cent in Angola, 35.2 per cent in Egypt, Kenya is 45.2 per cent and Ghana, 46.1 per cent.”
He said the report on the banking system stability review presented to members of the MPC members on financial soundness indicators remained positive, and showed that the banking system remained strong, sound, and resilient.
The capital adequacy ratio stood at 12.8 per cent in April 2023, still within the prudential requirement of between 10 per cent and 15 per cent, he said.
According to him, “Non-performing loans ratio declined from 4.5 per cent in March 2023 to 4.4 per cent in April 2023.
“Liquidity ratio rose to 45.3 per cent in April 2023, from 43.8 per cent in March 2023.”
He noted that this was above the minimum 30 per cent recommended by the prudential requirement.
Both the return on equity and returns on asset increased between March 2023 and April 2023, ROE rose from 21.6 per cent to 22.6 per cent; while ROA increased from 1.6 per cent to 1.7 per cent between March 2023 and April 2023, respectively, he said.
He noted that all the measures of banking size, assets, deposits, and credits also rose.
“Total assets of the banking industry grew by N16.65tn or 25.88 per cent between April 2022 and 2023,” he said.
According to him, industry credit increased by N4.54tn or 17.40 per cent between end April 2022 and end-April 2023.
He said gross credit had been on an upward trajectory since 2019, and that total industry deposits increased by N8.84tn or 21.4 per cent between the end of April 2022 and April 2023.
“The stress tests conducted on the industry show that it can weather the major risks and vulnerabilities in the system,” he said.
