E-Financial
Agusto & Co: Elevated CRR Level Moderated Banking Industry’s Performance in FY 2020
The Nigerian banking industry would have recorded a return on average equity (ROE) of 31.6 per cent if not for the aggressive implementation of the cash reserve requirement (CRR) policy in 2020, Agusto & Co. Limited has said.
In its flagship 2021 Banking Industry Report, the rating agency said the elevated CRR level moderated the banking industry’s performance and liquidity position during the year under review.
The report reviewed the banking industry structure, financial condition, the regulatory environment in addition to the macroeconomic environment and its impact on the Nigerian banking industry.
Specifically, Agusto & Co in the report stated that assuming the sterile CRR were invested in treasury securities at 5 per cent, N482 billion would have been added to the Industry’s profit before taxation.
This, they argued, would have increased the Industry’s return on average equity by 11 per cent to 31.6 per cent in the financial year ended 31 December 2020.
According to Agusto & Co, “The CBN’s policies targeted at lowering interest rates have persisted especially given the dire need to stimulate the economy following adversities created by the pandemic.
However, given the need to moderate inflation amidst efforts to maintain a stable exchange rate, the cash reserve requirement was increased and standardised to 27.5 per cent for both merchant and commercial banks.
The standardised CRR was implemented alongside discretionary deductions. As at FYE 2020, the Industry’s restricted cash reserves exceeded N9.5 trillion and translated to an effective CRR of 37 per cent.
“It is noteworthy that Nigeria has the highest reserve requirement in sub-Saharan Africa. South Africa, Kenya and Ghana all have CRR’s of below 10 per cent. We believe the elevated CRR level moderated the Industry’s performance and liquidity position during the year under review.
Assuming the sterile CRR were invested in treasury securities at 5%, N482 billion would have been added to the Industry’s profit before taxation. This would have increased the Industry’s return on average equity (ROE) by 1110 per cent to 31.610 per cent in the financial year ended 31 December 2020.”
Agusto & Co. added that the reliability of business continuity measures was tested in 2020, considering the movement restrictions that lasted for months.
Most banks, Agusto & Co. stated, showed resilience through innovative measures including remote work arrangements and upgrade of network infrastructure to accommodate higher traffic on digital channels.
“These arrangements also provided support during the mandatory curfew elicited by the civic unrest that followed the #EndSARS protests in October 2020.
“Indeed, the pandemic brought to the fore, technology’s crucial role in deepening financial services as some banks recorded as much as a 50 per cent increase in digital banking transaction volumes.
However, these gains were limited by the CBN-induced reduction in bank charges, which took effect in January 2020. As a result, electronic banking income declined by 27.3 per cent, accounting for a lower 13.2 per cent (FY 2019: 21.1%) of non-interest income, “the report stated.
According to the report, the COVID-19 pandemic brought about an extraordinary test for the global community.
It added, “Although the global COVID mortality rate stands low at about 2.2 per cent, casualties increased from less than 3,000 in December 2019 to about 3.9 million as at 30 June 2021. Nigeria’s mortality rate stood comparably lower at about 1 per cent as at the same date.
However, the local economy had its fair share of pandemic-related adversities. However, leveraging lessons from the 2016/2017 economic recessions, the Nigerian banking industry was better prepared in 2020.
“Proactive measures in the form of forbearance granted by the Central Bank of Nigeria CBN, enabled banks to provide temporary and time-limited restructuring of facilities granted to households and businesses severely affected by COVID-19.
There was generally a cautious approach to lending in the Industry, given difficulties in the operating environment.
Although gross loans and advances grew by 12 per cent, loan growth was negative when the 19.3% naira devaluation is considered. Underpinned by the forbearance and proactive measures adopted by banks, the NPL ratio improved to 6.6 per cent (FYE 2019: 7.6%).”
Securities and Exchange Commission (SEC) has unveiled a technology adoption assessment survey for registered capital market operators as part of efforts to deepen innovation and efficiency in the Nigerian capital market.
In a circular, the SEC stated that the exercise was designed to evaluate the level of adoption of advanced technologies among CMOs operating within the Nigerian capital market.
According to the notice, “The following technology adoption survey is designed by the Commission to assess the adoption of advanced technologies among registered Capital Market Operators.”
The SEC directed all registered operators to log into the e-portal at using their current access credentials to complete the survey. The exercise will run for two weeks, from 5 to 20 May 2025.
Speaking recently on the role of innovation in the capital market, Emomotimi Agama, director-general of the SEC, urged stakeholders to embrace technology as a catalyst for growth, improved transparency, operational efficiency, and market resilience.
He noted that the SEC recognises the emergence of new financial products and services driven by technological advancements, and remains committed to adapting its regulatory framework to meet the evolving needs of the market.
According to him, the commission’s approach to innovation is anchored on three pillars: investor safety, market deepening, and problem-solving aimed at building a robust and efficient capital market ecosystem.
Agama also highlighted the commission’s Regulatory Incubation Programme, which allows fintech startups to operate within a controlled environment for one year while appropriate rules are developed to govern their activities.
He said the programme is part of the SEC’s broader strategy to support innovation while safeguarding market integrity and investor interests.
International Monetary Fund (IMF) ,has confirmed that Nigeria has fully repaid about US$3.4 billion loan it got in April 2020 under the Rapid Financing Instrument to help alleviate the impact of the COVID-19 pandemic and the sharp fall in oil prices.
IMF said the loan has been repaid as of April 30, 2025 in a statement issued in Abuja, Nigeria’s capital on Thursday.
However, IMF said Nigeria is still expected to honour some additional payments in forms of Special Drawing Rights charges hat will amount to US$30 million annually.
“In line with the IMF’s Articles of Agreements, these charges, levied at the SDR interest rate, which is updated at the beginning of each week, apply to the difference between Nigeria’s SDR holdings (SDR 3,164 million) (US$4.3 billion) and its cumulative SDR allocation (SDR 4,027 million) (US$5.5 billion)
“The net payment of the charges stops when Nigeria’s SDR holdings reach the cumulative allocation amount,” IMF said in the statement. Online fitness
Central Bank of Nigeria (CBN) has allotted N598.33 billion in Nigerian Treasury Bills across three different maturities, with the 365-day bill dominating the auction, accounting for 80 percent of total sales and subscriptions.
A total of N482.62 billion was sold in the 365-day tenor, highlighting strong investor interest in the longer-term security.
The 91-day bill saw the least demand, with subscriptions of N48.4 billion and actual sales amounting to just N38.4 billion. This latest issuance brings the total Treasury bill sales for the year to N7.248 trillion.
At the auction held on Wednesday, May 7, the CBN offered N550 billion across the three maturities, N50 billion for the 91-day, N100 billion for the 182-day, and N400 billion for the 364-day bills. Despite total subscriptions dipping to N1.08 trillion from N1.53 trillion recorded at the previous auction, the auction was still oversubscribed, reflecting continued high liquidity in the financial system.
This demand pressure kept yields largely stable. The 365-day bill saw a marginal increase in yield to 24.41 percent from 24.36 percent, while the 182-day and 91-day yields remained unchanged at 20.38 percent and 18.85 percent, respectively. Yields have maintained a consistent level over the last four auctions, indicating a stable interest rate environment despite fluctuations in demand.
As of May 6, 2025, system liquidity stood at N1.21 trillion. When combined with maturing bills worth N287.98 billion, the total available liquidity more than tripled the N550 billion offered at the auction, further underscoring the robust investor appetite for government securities amid high market liquidity.
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