Policies, Economy, Technology, to Impact Nigeria’s Banking Sector in 2024 – Expert

Policy changes, economic conditions and technological advancements are some of the factors that will influence the Banking Sector performance in 2024.

The Head, Financial Institutions Ratings at Agusto and Co, Mr Ayokunle Olubunmi, stated this while speaking to members of the Finance Correspondents of Nigeria (FICAN) at the association’s bi-monthly forum with the theme, 2024 Economic Review/Outlook: “Impacts of Reforms on Banks’’.

Olubunmi however clarified that predicting the exact outcome was difficult due to the dynamic interplay of these elements.

He noted that those that would proactively address the challenges and capitalise on the opportunities presented by these factors would likely emerge stronger and more successful, stressing that these require flexibility, innovation, and a clear understanding of the shifting landscape.

Olubunmi outlined some of the themes that could impact the Nigerian banking sector in 2024 to be a more accommodating Central Bank, hawkish monetary policy, reform of the foreign exchange market, lower FX gains and muted International Trade, among others.

He said that expanding Nigerian banks abroad could diversify risk but could lead to facing new challenges, noting also that strengthening banks’ capital base could improve stability and lending capacity.

 Olubunmi said that consolidation could create larger, more efficient banks but potentially reduce competition adding that issuing new licenses could increase competition and innovation, but potentially fragment the market.

 He also said the shake-up in the merchant banking segment could create opportunities for some banks and challenges for others while the reform of the cash reserve requirement when modified could affect banks’ liquidity and profitability.

 On basel III transition, the analyst said that implementing stricter capital adequacy rules could improve financial stability but raise compliance costs while for macroeconomic downturn, he explained that economic slowdown could increase loan defaults and impact banks’ earnings thereby leading banks to face competition from non-bank players in digital payments.