Uncertainty Still Looms For Nigerian Banks

Alongside overall asset and non-interest income growth, Fitch wrote last fall that “cost management [can be] expected to take on increased focus” within the Nigerian banking sector; indeed, most explictly this sort of “efficiency”  (often proxied by non-interest expenses as compared with revenue or in some cases total assets) may be magnified given the fine line between containing risk and capturing its returns inherent to a business model that post-Lehman and under Basel III looks to discourage rather than encourage it in the first place.  Touting falling NPLs and higher capital levels  as a sign of “strength” is thus somewhat misguided.   A recent paper in fact (“Effect of Capital Adequacy on the Profitability of the Nigerian Banking Sector”) reiterates the “non-significance between CAR and selected bank profitability and performance metrics” while suggesting regulators focus rather on “intrinsic elements of bank operational activates” in terms of cultivating stability.  For Nigeria’s banks, the work has just begun.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.