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The gap between the ‘Haves and Have-nots’ in Nigeria’s banking system is widening, further validating the central bank’s governor’s call for another round of recapitalisation.
The earnings inequality for Nigerian lenders in terms of profitability as well as total assets are ominous because the small and mid-sized banks do not have enough buffers to shield them from macro shocks or headwinds.
Peering through their books shows Zenith Bank, Access Bank, Guaranty Trust Holdings, FBN Holdings, and United Bank for Africa (UBA), collectively generated a combined profit after (PAT) of N1.73 trillion as at September 2o23.
That compares with N188.01 billion combined net income of Stanbic IBTC Holdings, First City Monument Bank, Sterling Bank, Fidelity Bank, and Wema Bank, according to data gathered by MoneyCentral.
The cumulative total assets of the five largest banks or “big five” stood at N78.87 trillion as at September 2023, compared with N14.13 trillion for the small ones.
In 2022, big banks or fantastic five posted a collective N648.83 billion as net income or profit, and that compares with N113.52 billion realised by the Tier-2 lenders.
In 2021, Fantastic five posted a combined net income of N441.73 billion, and that is much higher than the N97.02 billion by the small lenders.
The earnings inequality has widened in 2023 than any other year because the big five made more money from foreign exchange revaluation gains and interest income investment securities as a strong liquidity position means they invest more in government securities.
Unity bank, a small and midsized lender, is technically insolvent and only a takeover can salvage it from collapse which will jeopardise depositors money.
The plan by the central bank governor Olayemi Cardoso to implement a new round of Nigeria Bank recapitalisation will pave the way for more synergies, shrink the gap between the ‘Haves and Have-nots, and avert a future banking sector crisis.
The last time the Central Bank of Nigeria (CBN) forced through a Nigeria bank recapitalisation was in 2004, when Charles Soludo, former CBN Governor, raised their capital base from N2 billion to N25 billion.
“There is the need for banks to recapitalise so that they can continue to exist,” said Samuel Nzekwe, former President, Association of National Accountants of Nigeria (ANAN).
“In addition, they need to recapitalise a little bit so that they can be in strong standing in case of any eventuality and problems,” Nzekwe said.
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