A financial analyst, Ayokunle Olubunmi, says several factors, including policy changes, economic conditions, and technological advancements, will influence the banking sector’s performance in 2024.

Mr Olubunmi, the head of financial institutions ratings at Agusto & Co, said this at a forum organised by the Finance Correspondents Association of Nigeria (FICAN) on Thursday in Lagos.

According to him, predicting the exact outcome is difficult due to the dynamic interplay of these elements.

He said those who would proactively address the challenges and capitalise on the opportunities presented by these factors would likely emerge stronger and more successful.

He said this required flexibility, innovation, and a clear understanding of the shifting landscape.

He outlined some factors that could impact the Nigerian banking sector in 2024 to be a more accommodating central bank, hawkish monetary policy, reform of the foreign exchange market, lower FX gains and muted international trade, among others.

The financial expert called for harmonising monetary and fiscal policies to tackle inflation.

He said the exchange rate might be challenging to control because of several changing variables, adding that the CBN would have to clear the backlog of FX.

Mr Olubunmi said the CBN would also need to oversupply dollars to the market to stabilise the economy.

“This volatility of the exchange is crazy. Until we stabilise the exchange rates, these guys will not come back (foreign investors),” he said.

He said the way the CBN manages the current $2.4 billion invalid forex outstanding claims it uncovered is important not to lose investors’ confidence.

He noted that expanding Nigerian banks abroad could diversify risk, but strengthening their capital base could improve their stability and lending capacity.

Mr Olubunmi said that consolidation could create larger and more efficient banks, potentially reducing competition.

He added that issuing new banking licenses could increase competition and innovation but potentially fragment the market.

He explained that a shake-up in the merchant banking segment could create opportunities for some banks and challenges for others, while reform of the cash reserve requirement when modified, could affect their liquidity and profitability.

He also said enforcing loan-to-deposit ratio compliance could drive credit expansion but raise concerns about credit quality.

On the Basel III transition, the analyst said implementing stricter capital adequacy rules could improve financial stability but raise compliance costs.

On the macroeconomic downturn, he noted that economic slowdown could increase loan defaults and impact banks’ earnings, adding that banks might face competition from non-bank players in digital payments. 

(NAN)