Four banks, GTBank, Zenith Bank, UBA and Access dominate the Nigerian banking space, controlling as much as 70 per cent of its market share, National Daily findings has revealed.
According to the 2017 Nigerian Banking Sector Report released at the weekend, these banks also have most of the bad loans in the industry.
The report, prepared by Afrinvest West Africa, an independent investment banking firm, shows that naira’s depreciation affected all the banks and the oil and gas/ power sectors.
It observed a continued widening of the gap between the Tier-1 and the Tier-2 banks due to naira devaluation and foreign exchange (forex) crisis.
According to Ike Chioke, Managing Director, Afrinvest West Africa, banks that extended foreign currency loans to the power sector and oil and gas sector had their problems magnified by devaluation of the naira.
He said that some of the Tier-1 banks with more foreign currency deposits that were risk assets benefited from the devaluation and, therefore, were booking forex gains. “The likes of Guaranty Trust Bank, Zenith Bank, United Bank for Africa and Access Bank belong to that group,” Chioke said.
The forex crisis, he noted, created problems in the power sector because a lot of people had borrowed money in foreign currency to build gas pipelines, gas processing systems to deliver power to the power stations and now the power stations cannot pay for that. That, he said, led to massive bad loans.
Chioke said some of these bottlenecks had been resolved. The positive profit momentum, which most of the banks registered, has given them some buffer to get away with some of the ailing problems mentioned, according to him.
On whether the Tier-1 banks will eventually swallow the Tier-2 banks and push them out of the market, he said: “No. There must be specialization for everybody. The banking industry is growing and we have seen double-digit growth over all. It’s just that the Tier-1 banks are growing faster. So, it could be a Tier-2 bank that may see its business double.”
The CBN classifies lenders into three groups: large or big banks, those with assets greater than or equal to N1 trillion; medium banks with assets greater than or equal to N500 billion but less than N1 trillion and small banks with assets of less than N500 billion.