Banking transactions through digital channels have increased by 55 per cent to N600tn, according to a report by Afrinvest.
The report, titled ‘Bank Recapitalisation: Catalyst for a $1tn Economy’, indicated that revaluation gains were estimated at $1.7bn.
The report added that the finance and insurance sector, often used as a proxy for the banking industry, has exhibited growth, recording growth rates of 10 per cent and 16.4 per cent in 2021 and 2022, respectively, the sector’s growth accelerated to 26.5 per cent in 2023.
Afrinvest Research attributed the growth to several factors: the increased usage of digital financial channels, effective optimization of interest rates for trading and loan pricing, and favourable Net Open Position, which led to substantial revaluation gains.
It noted that despite the positive performance, the future outlook for the banking sector remained uncertain due to the persistently high inflation, which could affect the sector’s stability and growth.
Nigeria faces its worst inflation crisis in over three decades, with the inflation rate climbing to 34.0 per cent in the 12 months to May 2024.
The headline Inflation has, however, eased to 33.40 per cent in July 2024, relative to the June 2024 rate of 34.19 per cent.
Afrinvest advised banks to enhance their risk management frameworks, scale up investments in cost-effective digital channels, and explore new business opportunities in both lateral and vertical segments to strengthen resilience against systemic risks.
For long-term stability, the report underscored the need for comprehensive fiscal and monetary policies that address structural bottlenecks, including security concerns, infrastructure gaps, and liquidity management.
It also stressed the need to optimise foreign exchange inflows and block financial leakages to mitigate the impact of ongoing high inflation.
“Given the highlighted risks that could ensue from a prolonged high inflation episode, we recommend that banks should strive to enhance their risk management framework, scale up investment in cost-effective digital channels, and explore new business opportunities in both lateral and vertical segments to enhance resilience against systemic risks.
“Overall, we maintain that concerted fiscal and monetary policy efforts that would holistically address structural bottlenecks (notably, insecurity and infrastructural gaps), optimise FX inflow channels, block leakages, and strengthen liquidity management remain the lasting solution to Nigeria’s high inflation predicament,” it added.
