These are challenging times for Nigeria’s banks. As the country’s oil-dependent economy stalls and government spending and private sector investment begin to wane, opportunities for growth in this competitive market are diminishing. These difficulties have been compounded by lack of firm economic policy from the new government of Muhammadu Buhari, who was not expected to appoint a cabinet until the end of September, close to four months after his election. Meanwhile, regulatory headwinds from the central bank, including increased cash reserve requirements and the introduction of various foreign exchange controls, have hit the banking sector’s liquidity hard.
Cumulatively, these events have drained any near-term optimism from most of the country’s largest lenders. “This is going to be a very difficult year for Nigeria’s banks. I don’t see any way around it,” says Abubakar Suleiman, executive director of Sterling Bank. Though much will depend on the movement of oil prices, as well as the policy decisions of the federal government in the coming months, there is some way to go to achieve any material change in the growth prospects for the sector.
