Between January and September 2018, the Nigerian Stock Exchange’s banking index dropped by 26.4%.

Indeed, from the peak of 619.14 reached on January 18, it fell to 466 during the last session (September 24).  

Investors seem less confident in the listed banks’ capabilities in creating high growth. Yet, the performance of those banks during the first semester of this year was not that alarming (except Ecobank whose headquarters is in Togo and Skye Bank that had not published its reports). According to data gathered by Ecofin Agency, their net profit was NGN332.4 billion in H1, 2018 representing a rise of 13.16% on a year on year basis.

Nevertheless, those investors may be worried by the high volume of bad debts and important investments in the oil sector (still exposed to external shocks) realized by the banks. In addition, these investors are also considering the impact of the implementation of the IFRS9 reporting standard that requires the actual credit risk as well as the potential risk to be taken into account.  

Let’s note that with more than NGN2,828 billion ($7.6 billion) the banking sector’s capitalization makes more than 13% of Nigeria stock market (if to consider Jaiz Bank whose consolidation method is different from the other banks’).

Idriss Linge