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LAST UPDATED AT Mon May, 09 2011
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 RenCap projects 8% growth for Nigeria in 2011
By Stella Odueme, Senior Correspondent, Lagos

Intercontinental Bank’s Group Managing Director/Chief Executive, Mr. Mahmoud Lai Alabi (left) receiving the excellent leadership and entrepreneurship award plaque for the banking sector from Alhaji Abdulahi Ibrahim (SAN), former Minsiter of Justice and Attorney General of the Federation, supported by Alhaji Ahmad Rabiu, Chairman Northern States Chamber Of Industry, Mines And Agriculture (CONSCCIMA),during the CONSCCIMA awards night at Abuja recently.  


Leading emerging markets investment bank, Renaissance Capital (RenCap), with operations in Russia, Central Asia, Eastern Europe and Africa, on Monday released its 2011 Nigerian Report, agreeing with the forecast by the International Monetary Fund (IMF), among others that Nigeria’s economy could grow by between 7 and 8 per cent this year, from 7.8 per cent last year.

The growth, the report said, will come on the back of bullish investor sentiment, following the recently concluded elections guaranteeing another four-year term for President Goodluck Jonathan and meaning a continuation of the power and financial services reforms.

According to the report, with the nation’s “macro and politics looking good, in 2011, we think Nigeria is set for another year of 7-8 per cent GDP growth, and with oil price running north of $100/bbl, the current account should run a surplus of 9 per cent.” 

Inflation, the report however noted, “remains a concern, at 12 per cent per cent 2011 (estimates), while we expect the Naira to remain broadly stable. The recent election cycle has, on balance, been positive, and should shift market focus away from political risk,” the report said.

The report incorporates coverage on Zenith Bank, First Bank, Access Bank, Diamond Bank, Guaranty Trust Bank, United Bank for Africa, Skye Bank, First City Monument Bank and Fidelity Bank, even as the sector looks forward to a new growth spurt, following the clean-up process undertaken by AMCON. 

Renaissance Capital, according to a statement, also anticipates strong credit growth in 2011 following recent positive trends.

“Financial trends, a positive bias. Credit growth has started to recover and should deliver 15 per cent sector-wide in 2011, while margins should see upward pressure from a rising-rate environment. Cost focus at many banks is already paying dividends while provisioning charges are falling fast, in line with improving asset quality. On heavy capital bases, RoEs are trending to double-digit territory while ROAs (Return on Assets) of 2 per cent-plus are the norm by 2012-2013E, and are more indicative of profitability.”

Commenting on the report, Lead Author, David Nangle explained that the projections also took account of the activities of the Asset Management Corporation of Nigeria (AMCON), which has successfully restored investor confidence in the nation’s banking sector.

“We believe it is poised for a new era of growth. This is based on Nigeria’s strong macro-economic outlook, with growth projected to be between 7-8% in 2011 and the strong capitalisation in the banking sector, which is majority deposit-funded and ample liquidity provide an enticing structural backdrop for Nigerian banks.”

Credit growth, the statement continued, has started to recover and should deliver an estimated 15 per cent sector-wide return in 2011, while margins should see upward pressure from a rising-rate environment. 

Cost focus at many banks is already paying dividends while provisioning charges are falling fast, in line with improving asset quality. On heavy capital bases, RoEs are trending to double-digit territory

“We still highlight macro and political risks as key top down concerns, particularly with oil remaining a key factor for Nigeria’s budget and revenues. At the sector level, post the recent crisis, regulation will need to prove itself through the cycle before we are fully comfortable,” the statement added.


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