Dr. Bunmi Bajomo, the Head of Corporate Banking Group and Chief Operating Officer at Ecobank Transnational (ETI), has highlighted the challenges facing Nigerian banks in competing with their counterparts in North and East Africa, particularly in foreign currency markets.
Speaking at the Nairametrics’ Economic webinar titled “CBN Policies and Their Impact on the Economy,” Dr. Bajomo underscored the necessity for Nigerian banks to recalibrate amidst severe economic pressures such as the COVID-19 pandemic and significant depreciation of the naira.
Dr. Bajomo emphasized, “Nigerian banks currently lack the competitive edge against their North and East African counterparts in foreign currency markets. With the total industry asset estimated at $45 billion, it’s evident that most leading banks, like the FUGAZ group, already possess assets well above $17 billion. This raises the crucial question of whether we are advancing or regressing.”
Regarding the Central Bank of Nigeria’s (CBN) decision to exclude retained earnings in the calculation of new capital requirements, Dr. Bajomo offered nuanced justification, suggesting it might serve to absorb shocks amid challenging macroeconomic conditions.
She further noted that the CBN’s initiative for recapitalization could potentially de-concentrate the banking sector, offering smaller banks an opportunity to expand their capacity and handle larger trade volumes. Currently, the industry is dominated by the top 5 banks, which control 80% of total loans disbursed and 81% of total deposits. Dr. Bajomo expressed hope for a reversal of this trend, drawing parallels with the significant growth observed in banks following the 2004/2005 recapitalization exercise.
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