Report: UBA, Zenith, Access, Others Hits N600trn in Digital Transactions

• New study showed that the amount of money exchanged in the banking sector through digital channels has increased by 55%
• The analysis pointed out that the insurance and finance industries, had shown signs of expansion, with significant growth rate
• In spite of this, the continued high rate of inflation made the future prospects for the banking sector uncertain

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Afrinvest reported that the amount of money that is transacted through digital channels in the banking industry has climbed by 55% to N600 trillion.

According to the report on "Bank Recapitalization: Catalyst for a $1tn Economy" cited by The Punch, revaluation gains were projected to be worth $1.7 billion.

The study also noted that the finance and insurance sectors, which are frequently used as stand-ins for the banking sector, had shown signs of expansion, with growth rates of 10% and 16.4% in 2021 and 2022, respectively. In 2023, the sector's growth surged to 26.5%.

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The growth was ascribed by Afrinvest Research to a number of variables, including the growing use of digital financial channels, efficient interest rate optimisation for loan pricing and trading, and a favourable net open position that resulted in significant revaluation gains.

It was mentioned that even with the good results, the banking industry's prospects for the future were still unclear because of the ongoing high rate of inflation, which could have an impact on the stability and expansion of the industry.

Nigeria experiencing inflation crises

Nigeria is currently experiencing its biggest inflation crisis in more than thirty years, with an increase in inflation to 34.0% in the year ending in May 2024.

However, compared to the June 2024 figure of 34.19%, the headline inflation rate has decreased to 33.40% in July 2024.

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To increase resilience against systemic risks, Afrinvest urged banks to improve their risk management frameworks, increase investments in affordable digital channels, and look for new business prospects in both lateral and vertical areas.

The research emphasized the necessity of comprehensive fiscal and monetary policies that address structural impediments, such as infrastructural deficits, security concerns, and liquidity management, in order to achieve long-term stability.

In order to lessen the effects of continuous high inflation, it also emphasized the necessity of optimizing foreign exchange inflows and preventing financial leakages.

“Given the highlighted risks that could ensue from a prolonged high inflation episode, we recommend that banks should strive to enhance their risk management framework, scale up investment in cost-effective digital channels, and explore new business opportunities in both lateral and vertical segments to enhance resilience against systemic risks.

“Overall, we maintain that concerted fiscal and monetary policy efforts that would holistically address structural bottlenecks (notably, insecurity and infrastructural gaps), optimise FX inflow channels, block leakages, and strengthen liquidity management remain the lasting solution to Nigeria’s high inflation predicament,” it added.

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Commercial banks in Nigeria by assets

Legit.ng reported that the combined total asset value of Nigeria's tier-one largest banks increased to N116.80 trillion as of the end of the first quarter of 2024.

This figure represents a 23.81% or N22.46 trillion increase compared to N94.33 trillion as of December 2023.

Nigeria's Tier 1 banks: FBN Holdings (First Bank), Access Holdings (Access Bank), GTCO (GTBank), UBA, and Zenith Bank.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

Source: Legit.ng