Profits made by Nigerian banks may drop in 2018 due to a slow down in the rate at which treasury bills are issued by the federal government, a report by ratings agency Fitch has revealed.
Central Bank of Nigeria (CBN) latest issuance schedule shows N1.1 trillion ($3.6 billion) of rollovers in 1Q18 against NGN1.3 trillion of maturing bills. The reduction in rollovers indicates the apex bank is issuing fewer treasury bills, Nairametrics reported.
While the country’s economy has recovered from recession, growth remains weak. One time earnings on such as foreign exchange revaluation gains are no longer present. Interest rates are also expected to trend lower going forward.
However, tier one banks are much likely to fare better. Tier one banks in the country are the most capitalized and include First Bank, UBA, GT Bank, Access Bank and Zenith Bank.
Return on average equity (ROAE) for tier one banks are over 20 percent compared to an ROAE of 4-6 percent for some tier two banks. ROAE is net income divided by average shareholders equity.