By Blaise Udunze
STRONG indications emerged last week that the fourth quarter financial performance of commercial banks may drop following the challenging macro-economic headwinds, pervading the business environment.
Daily Sun findings showed that the hawkish monetary policy, foreign exchange constraints, high exposure of Nigerian banks to the public sector and the oil and gas sector have weakened their assets quality as the revenue profiles of government and indigenous downstream and upstream companies were impaired by the oil price crash.
Credit allocation by banks have shown that the bulk of their loans in the past two years went to oil and gas sector to the detriment of other sectors. The sector attracted over 26 per cent of the total bank loans to the economy despite its relative low contribution of about 11.2 per cent to the economy’s Gross Domestic Product (GDP), suggesting a crowding out of other productive sectors of the economy.
This has led to higher Non-Performing Loans (NPLs) and impairment charges affecting profitability of banks, especially for Tier-2 banks.
Source : SunOnline