H1 2022: Nigeria’s Banking Sector Leads, Attracts $1.47 Billion Foreign Inflows

Even though the banking sector in Nigeria continues to be grappled with macroeconomic pressures, such as rising inflation, fluctuating naira-to-dollar exchanges rates, and the likes, the Central Bank Of Nigeria, (CBN) disclosed that the sector recorded the highest amount of foreign inflow compared to other sectors of the Nigerian economy.

The banking sector attracted $1.47 billion as capital inflows in the H1 of 2022, an increase of 109.8%, compared to $698.2 million received in the second half of 2021 and 46.5% higher than the $1 billion inflows recorded in the corresponding period of 2021.

The banking sector accounted for 47.1% of the inflows in the Nigerian economy, followed by the manufacturing and financing sectors accounting for $457.7 million and $396.7 million respectively.

The banking sector in Nigeria is said to have settled for some major shifts in its operations this year, as last year, the Central bank of Nigeria (CBN), disclosed that the total assets of the banking industry grew by 20.97% from N53.17 trillion in April 2021 to N64.32 trillion in April 2022, which indicates that there is an N11.115 trillion increase within one year.

The banking industry in Nigeria despite some constraints has continued to grow significantly in recent years, owing to the exceptional performances of traditional banks in the country.

Some top-tier banks on the Nigerian exchange, generated a sum of N77.01 billion from electronic business in the first quarter of 2022, growing the top line by 11.7% compared to N68.92 billion recorded in the corresponding period of the previous year.

Also, the Fintech sector has also been attributed to have helped improve the growth in the banking sector, with a large percentage of inflows coming through Fintech startups either from international venture capitalist firms or Angel investors.

A report disclosed that Fintech firms raised a sum of $658.4 million in funding in H1 2022 across 23 deals. Other financial services firms recorded total deals worth $345.3 million.

Meanwhile, a total sum of $3.11 billion in capital was imported into the Nigerian economy as foreign inflows, between January and June this year, most of which were in form of foreign portfolio investments.Comparing the total inflows from the first half of last year, it grew by 11.8% when compared to the second half of 2021, where it declined by 20.7%.

Recall that the COVID-19 pandemic shook the economies of nations, which affected the capital inflows in Nigeria in the second half of 2020, as investors became wary about investing their money in Nigeria’s economy.

Despite this setback, there was a notably strong resilience in the second half of 2021, as inflows began to pick up, although weren’t compared to the success of inflows during the pre-pandemic era. In the first half of 2022, most of the inflows that came into the country came as foreign portfolio investment (FPI) at $1.71 billion in H1 2022, accounting for 55.2% of the total inflows recorded in the review period.

A major factor that has been attributed to the decline in Nigeria’s foreign inflows is the inability of foreign investors to repatriate their earnings from the economy as a result of FX scarcity.

Nigeria top-tier banks, UBA redeemed its $500 million 5-year Eurobond in June 2022, while Zenith Bank completed the redemption of its $500 million Eurobond in the previous month. This indication of the creditworthiness from the Nigerian banking industry, brought about the confidence of foreign investors to be willing to invest in the sector.