Nigeria’s big banks received a combined N16.22 trillion from customers through deposits across various account types in the first quarter of 2020 as business activities almost came to a halt due to the coronavirus pandemic.
The total deposit collected by the tier-one lenders in the review quarter was 12.72 percent above the N14.39 trillion recorded in the comparable quarter of 2019.
“In Q1, majority of our trading partners, particularly for imports, implemented severe lockdown measures which prevented the importation of raw materials and other items for resale,” Ayorinde Akinloye, research analyst at CSL Stockbrokers, said.
According to the Lagos-based analyst, the slowdown in business transactions “led to cash revenues remaining in the banking system since businesses could not transact”.
Some of Nigeria’s most economically vibrant cities like Lagos, the country’s business hub, Ogun and FCT were put on lockdown for about five weeks to enable Africa’s largest economy to curtail the spread of the deadly coronavirus.
Before the lockdown, though, businesses were adopting a wait-and-see attitude due to the economic uncertainty that came with the fast increase in the number of confirmed cases after the country reported its first case on February 27. Hence, companies left their cash in the banks untouched.
Analysis of the banks’ Q1 financials showed that the big five commercial lenders recorded a combined uptick of N1.8 trillion year-on-year in the review period.
Zenith Bank, one of the lenders with the highest customer base in the country, reported the most deposit increase in value terms. It collected N4.46 trillion from its customers in the review quarter. This was an increase of N890 billion when compared to the N3.57 trillion recorded in Q1 2019.
This was followed by UBA as the bank recorded a deposit increase of N440 billion. UBA collected a total of N4.27 trillion in Q1 2020 as against the N3.83 trillion collected in the corresponding quarter of 2019.
Also, GTB and Access Bank reported a combined increase in the deposit collected from their customers at N440 billion in the review quarter. GTB alone collected N2.77 trillion, N240 billion higher than the N2.53 billion reported the previous year. Access Bank, on the other hand, reported a deposit increase of N200 billion from N4.26 trillion in Q1 2019 to N4.46 trillion in the first three months of 2020.
Further analysis of the banks’ financial reports revealed that FBN holdings saw the most jump in the volume of deposit collected from its customers. The lender recorded an increase of over 100 percent at N243.6 billion from N20.32 billion in the first three months of 2019 to N263.92 billion in Q1 2020.
In a bid to improve lending to the real sector of the economy, the Central Bank of Nigeria (CBN) upwardly reviewed deposit money banks’ portion of minimum loanable deposits twice last year, first to 60 percent, and then to 65 percent.
The apex bank reviewed the Loan-to-Deposit Ratio (LDR) a second time as a result of the appreciable growth in the level of the banking sector’s gross credit following the earlier increase of the LDR to a minimum of 60 percent in July 2019, as well as the need to sustain the momentum, the apex bank said in a September 30, 2019 circular
“All Deposit Money Banks are required to attain a minimum of LDR of 65 percent by December 31, 2019,” the CBN said. “To encourage the SMEs, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 percent in computing the LDR for this purpose.”
When asked if the impact of coronavirus outbreak would affect banks’ ability to meet the CBN’s LDR policy, a Lagos-based analyst said the banks that slowed their lending rate would have their LDR affected.
“Some banks ramped up lending in Q1 but many banks slowed,” the analyst said.
