Nigeria’s steep improve in regulatory money reserve necessities for its banks might greater than halve the tempo of mortgage progress for the most important lenders, because the trade contends with tighter liquidity circumstances.
The Central Financial institution of Nigeria on Tuesday elevated the minimal money reserve ratio for the trade to 45% from 32.5% to assist curb naira liquidity, rein in inflation and stabilize the change price.
“The hike will scale back banks’ liquidity ratios and constrain mortgage progress,” stated FBNQuest analyst Tunde Abidoye in Lagos. “We see a median in mortgage progress of round 10%-15% in 2024 throughout our protection universe,” he stated. That’s in comparison with 37% progress final 12 months among the many largest lenders it screens together with Warranty Belief Holding Co. Plc, Entry Holdings Plc and Zenith Financial institution Plc.
The brand new threshold locations Nigeria’s money reserve necessities far above its African friends. The money reserve ratio in South Africa is 2.5%, 4.3% in Kenya and 15% in Ghana.
“Relative to banks from different areas, the outlook for Nigerian banks is prone to worsen,” Bloomberg Africa Economist Yvonne Mhango stated. “Lending ought to gradual in Nigeria. A rise within the fraction of deposits that banks have to carry as reserves, implies a fall in cash provide.”
The NGX Banking index was down by 6.9% to 800.33 at 3:30 p.m. in Lagos, its steepest decline in a month. Entry Holdings, the highest lender by belongings, retreated 9.8% to steer the sell-off on the gauge.
