Tier 1 lenders in Africa’s most populous nation saw loan growth in 2016 largely from the effects of devaluation of the domestic currency the naira even as they tightened lending standards as a result of the economic downturn.
Zenith Bank, GTBank and Access Bank (the only names to have released Full Year 2016 results) recorded a combined gross loans and advances to customers of N5.68 trillion, which represents a 20.33 percent increase from N4.72 trillion recorded as at December 2015.
Meanwhile the combined loans to deposit ratio moved to 72.36 percent in December 2016 as against 69.16 percent the previous year.
Analysts interviewed by BMI are of the view that a further weakness of the naira could see foreign currency denominated assets balloon (in naira terms) but they never stated the effects of such a spike on balance sheet.
The central bank in June last year adopted a flexible exchange rate regime that saw the naira lose 40 percent of its value against the U.S dollars.
The Apex bank had clutched unto a currency peg and capital controls in order to curb inflation and stop the continued depletion of the external reserve due to a sharp drop in the price of oil.
Rather than assuage the situation, the policy further aggravated the credit crunch as investors fled and some customers were unable to pay loans owed to banks.
For instance, Abu Dhabi telecoms group Etisalat defaulted on $1.23 billion loan facilities with Nigeria as the telecoms giant struggles with dollar scarcity.
Etisalat owes GTbank and Access Bank $131 million and $138 million respectively.
Nigerian banks industry wide Non-performing Loans (NPLs) rose to 13.40 percent last year, according to a recent report by the central bank.
Access Bank, Zenith Bank and GTBank have NPLs of 2.10 percent, 3 percent and 3.66 percent as these lenders intensify on their management strategy.