In March 2008, we updated all data for the 59 countries surveyed with official figures, sourced fromcentral banks and regulators. In most cases, we were able to find data that pertained to the end of 2007: inalmost all other cases, the data pertains to September 30 2007. As a result, the insights that we derive onparticular countries are based on consistently sourced information that is far more current than it had beenpreviously.
Although we gather data for countries such as the US, Japan, Australia and the eurozone, the vastmajority of the 59 countries whose banking industries we survey are, or are generally seen as being,emerging markets. For all the widely publicised problems of large banks in developed countries, in thewake of the subprime banking crisis in the US, 2007 was an extremely good year for the banking sectorsof the emerging markets. In local currency terms, the median growth in assets was 21% (in Brazil). Themedian rates of growth in loans to non-bank customers and in deposits were 22% (in India) and 18% (inMorocco). In some countries - and not just those enjoying oil booms - the figures were spectacular. InUkraine, for instance, assets and deposits rose by 76% and 62% respectively. Loans grew by more thanone-third in Bulgaria, Estonia, Latvia, Lithuania, Romania, Russia, Serbia, Slovenia, Peru, Bahrain, Iranand Nigeria. Deposits also rose by more than one-third in most of these countries.
In absolute terms, Nigeria’s banking sector enjoyed very good growth through the year to December 312007. In local currency terms, total assets, total loans and total deposits increased by 58%, 96% and 60%respectively. The loan/deposit, loan/asset and loan/GDP ratios all rose.
Relative to other countries surveyed by BMI, these achievements are even more impressive. Of the 59countries surveyed, Nigeria ranks second in terms of local currency asset growth, third in terms of bothlocal currency loan growth and local currency deposit growth. However, it needs to be remembered thatall three of the ratios are rising from very low levels. Nigeria’s rankings in terms of its loan/deposit,loan/asset and loan/GDP ratios are 36th, 39th and 53rd respectively. In a country with per capita GDP ofUS$1,114, deposits per capita are just US$334.
In Q108, we envisaged that total assets, total loans and total deposits would each rise by 25% annuallythrough the 2007-2012 forecast period. Now, and using an improved forecasting method, we are lookingfor growth rates of 32%, 46% and 33% respectively.
Since Q108, we have calculated, on a consistent basis, a Commercial Bank Business Environment Rating(CBBER) for each of the 59 countries surveyed. The CBBER includes an assessment of the limits ofpotential returns: it does this by taking into account the size, growth potential and bancassurancepotential of the banking sector, as well as aspects of the economy in 2007. The CBBER also depends onan assessment of the risks to the realisation of potential returns: this reflects BMI’s assessments ofoverall country risk, together with the regulatory and competitive environment.
Nigeria’s CBBER is 53.9. In the context of the Middle East and Africa, this is on the low side, but notdisastrously so. In essence, Nigeria’s commercial banking business environment is greatly complicated byan overall country risk environment that is very difficult. Nigerians (or at least some of them) havebenefited substantially from the oil boom of the last 18 months. However, the past volatility of theeconomy is a factor that cannot be ignored. Nigeria’s CBBER is boosted, though, by its likely absolutegrowth in the coming years: in a regional context, the country’s commercial banking sector is too large tobe ignored.
It is still not entirely clear what will be the final outcome of the recapitalisation and consolidation of thebanking sector that was mandated by the Central Bank of Nigeria. Over the years that BMI has beenmonitoring the Nigerian commercial banking sector, there has been a clear improvement in the quantityand transparency of information coming from the regulator. (At the same time, this has not been true inrelation to the country’s insurance regulator.) It may well be that the level of risk in the commercialbanking sector is falling - if gradually - from a high level.
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