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Banks have recorded an uptick in profit, but the restriction the Central Bank of Nigeria (CBN) is about to place on government securities could cast a pall on future earnings.
Fees and commission income, reduction in impairment charge, and foreign exchange gains help compensate for a slow growth in gross earnings.
The cumulative net income of 12 largest lenders that have released first quarter results increased by 16.50 percent to N223.96 billion from N192.24 billion as at March 2017.
Drilling down the figures shows Access Bank recorded the fastest increases in profit, but Stanbic IBTC Holdings and Union Bank fell of the cliff as bottom lines shrank.
Lenders future earnings could be under threat as CBN moves to restrict their appetite for Federal Government Securities.
The Abuja based bank is set to roll out a comprehensive framework that would discourage the current high appetite by commercial lenders for government securities and encourage increased credit flow to the poorly-served productive sectors of the economy.
“The truth is that according to our own regulation, there is a particular minimum percentage of government securities that the banks must invest in to remain liquid, but again, we have observed unfortunately increasingly that banks rather than focusing on granting credit to the private sector tend to direct their focus mainly in buying government securities,” Emefiele said.
“The Monetary Policy Committee has frowned on that, and has directed the management of the CBN to put in place policies or regulations that will restrict the banks from unlimited access to government securities,” he said.
The first quarter financial statement of Nigerian banks shows profit has been growing at a slow pace while interest income on loans and advances and treasury bills shrank.
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