Following massive impairments that have prompted several banks to issue profit warnings and the general downturn in the Nigerian economy, the FSDH Merchant Bank Limited (FMBL) has warned that 2016 will be a very challenging year for banking business in Nigeria.
The bank noted that the federal government’s pronouncement that it intended to run a fiscal deficit in excess of N2.2 trillion this year to revive the struggling economy to ensure a sustainable growth path remained one of the factors that would pose challenge to banks.
Speaking at the bank’s annual general meeting (AGM) held in Lagos, Chairman of FMBL, Osaro Isokpan, noted that the government’s expectation to raise funds in addition to the N900 billion it planned to borrow from the domestic market, has the implication of further toughening the banking environment.
Speaking in the same vein, a representative of an institutional investor in FSDH, Oyinkan Adewale, admitted that the economic situation in the country and the persisted bear market have affected shareholders investments, especially in equities. He, however, expressed optimism that with the measures put in place so far by the regulator especially the Corporate Governance Index, the investments were protected.
He said: “For the equities market, if we can just hold on, it will grow. Presently, we are not seeing inflows from outside the market. What has been growing every economy even the equities market in the western world has been new capital injected into the system; but I am not seeing much of capital from foreigners. It’s barely one year, the new administration came on board, and investors are still waiting, they want to know which direction the economy is going before we will start seeing inflows.”
In spite of the challenges in the economy and in the financial markets in 2016, the FMBL Chairman, Osaro said: “We will continue to explore and expand relationships with our esteemed customers in carefully selected industries and to offer our tailor-made solutions. We see increased need in the economy for financial advisory services and are poised to exploit this opportunity. We have reviewed our lending to the sectors that are considered to be most vulnerable to the current economic challenges. It’s pertinent to note, however, that no sector is entirely immune to the current challenges.”
The Managing Director and Chief Executive Officer of FMBL Mr. Rilwan Belo-Osagie had told THISDAY at the bank’s pre-AGM press briefing that the volume of businesses that commercial banks do often expose them to risks.
He said the sad thing about the Nigerian economic situation was the repeating of what had happened in the past and the government’s inability to diversify the economy.
He however expressed optimism that the oil prices will go up again, adding government will take advantage of a likely rise in oil price to save and diversify the economy.
“The new year 2016 marks the fourth year of our operations as a merchant bank. In spite of the challenges in the economy and in the financial markets, we intend to continue to harness the opportunities we identify in carefully selected industries while continuing with our conservative approach of building a portfolio of risk assets that will be enduring. We will continue to maximise shareholder value by constantly realigning our operations and also harnessing business opportunities as they arise,” he said.