Mr. Ayokunle Olubunmi, a financial analyst and Head of Financial Institutions Ratings at Agusto & Co, discussed various factors that are poised to influence the performance of the banking sector in 2024 during a forum organized by the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
Olubunmi highlighted the complexity of predicting outcomes due to the dynamic nature of factors such as policy changes, economic conditions, and technological advancements. He emphasized that proactive measures to address challenges and capitalize on opportunities would be key to emerging stronger and more successful.
Identifying factors that could impact the Nigerian banking sector in 2024, Olubunmi mentioned a more accommodating Central Bank, hawkish monetary policy, reform of the foreign exchange market, lower FX gains, and muted international trade, among others. He stressed the importance of harmonizing monetary and fiscal policies to address inflation and the need for the Central Bank to manage the exchange rate effectively by clearing FX backlogs and oversupplying dollars to stabilize the economy.
Olubunmi also discussed the significance of how the Central Bank manages the uncovered $2.4 billion invalid forex outstanding claims to maintain investor confidence. He suggested that expanding Nigerian banks abroad could diversify risks, while strengthening their capital base could enhance stability and lending capacity. Additionally, he mentioned the potential impacts of consolidation, issuing new banking licenses, shake-ups in the merchant banking segment, reform of the cash reserve requirement, and enforcing loan-to-deposit ratio compliance on the banking sector.
Regarding Basel III transition, Olubunmi noted that stricter capital adequacy rules could improve financial stability but raise compliance costs. He also highlighted the potential challenges posed by macroeconomic downturns, such as increased loan defaults and competition from non-bank players in digital payments, which could affect banks’ earnings.
