Nigerian Banks’ e-Banking Income Drops 27.3% Despite High Transactions

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By Dipo Olowookere

A new report by Agusto & Co. Limited has shown that in the 2020 fiscal year, the banking industry in Nigeria recorded a decline in electronic banking income.

In the report by the nation’s foremost research house and rating institution, it was stated that the drop was by 27.3 per cent despite a spike in digital transactions in the pandemic year.

The flagship 2021 Banking Industry Report revealed that last year, some banks recorded as much as a 50 per cent increase in digital banking transaction volumes, but the gains were shortened by the reduction in bank charges from January 2020 by the Central Bank of Nigeria (CBN).

Agusto said this action by the banking sector regulator affected the e-banking income and accounted for a lower 13.2 per cent of non-interest income compared with the 21.1 per cent posted at FY 2019.

It was stated that the pandemic demonstrated how technology can be used to deepen financial services in the country because it was the means most banking institutions used to offer their services to customers during the lockdown in the second quarter of the year and the quarter of the year during the #EndSARS saga.

In the report, it was stated that despite the challenges in the year, the sector showed resilience, leveraging lessons from the 2016/2017 economic recession.

“Proactive measures in the form of forbearance granted by the CBN enabled banks to provide temporary and time-limited restructuring of facilities granted to households and businesses severely affected by COVID-19.

“There was generally a cautious approach to lending in the industry, given difficulties in the operating environment.

“Although gross loans and advances grew by 12 per cent, loan growth was negative when the 19.3 per cent Naira devaluation is considered.

“Underpinned by the forbearance and proactive measures adopted by banks, the NPL ratio improved to 6.6 per cent (FYE 2019: 7.6 per cent),” a part of the summary of the report made available to Business Post read.

Agusto also noted in the report that the CBN’s policies targeted at lowering interest rates have persisted especially given the dire need to stimulate the economy following adversities created by the pandemic.

It stated that given the need to moderate inflation amidst efforts to maintain a stable exchange rate, the cash reserve requirement (CRR) was increased and standardised to 27.5 per cent for both merchant and commercial banks, adding that the standardised CRR was implemented alongside discretionary deductions.

“As at FYE 2020, the industry’s restricted cash reserves exceeded N9.5 trillion and translated to an effective CRR of 37 per cent.

“It is noteworthy that Nigeria has the highest reserve requirement in sub-Saharan Africa. South Africa, Kenya and Ghana all have CRR’s of below 10 per cent.

“We believe the elevated CRR level moderated the industry’s performance and liquidity position during the year under review.

“Assuming the sterile CRR were invested in treasury securities at 5 per cent, N482 billion would have been added to the industry’s profit before taxation.

“This would have increased the industry’s return on average equity (ROE) by 11 per cent to 31.6 per cent in the financial year ended December 31, 2020,” it said.

Agusto said for the report, it analysed the financial statements of 20 commercial banks and five merchant banks, taking into consideration the sector’s structure, financial condition, the regulatory environment in addition to the macroeconomic environment and its impact on Nigerian banking industry.

Business Post learned that the banks reviewed by Agusto were Zenith Bank Plc, Access Bank Plc, First Bank of Nigeria Ltd, United Bank for Africa (UBA) Plc, Guaranty Trust Bank, Fidelity Bank Plc, Ecobank Nigeria, Standard Chartered Bank Nigeria, Union Bank of Nigeria Plc and Stanbic IBTC Bank.

Others were First City Monument Bank, Wema Bank Plc, Sterling Bank Plc, Citibank Nigeria, Polaris Bank, Unity Bank Plc, Providus Bank, Coronation Merchant Bank, FBN Merchant Bank, Nova Merchant Bank, FSDH Merchant Bank, Globus Bank, Rand Merchant Bank, Jaiz Bank and Titan Trust Bank.

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