The founder, Agusto & Co, Mr Bode Agusto, has predicted a tough year for the Nigerian banking sector, stating that industry’s profitability will drop in 2020, following the disruption caused by the COVID-19 pandemic.
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Augusto, said this during an online presentation titled: ‘How Will COVID-19 Impact the Economy,’where he pointed out that some commercial banks would need to raise equity in order to bring their leverage down to tolerable levels.
The former Director-General, Budget Office said:
The banking industry will continue to deliver sub-optimal returns sub-optimal returns in 2020. In fact, ROE will drop further due to higher loan impairment charges.
This will continue to impair the valuation of banks listed on the Nigerian Stock Exchange.
The financial analyst projected a drop in the importation of goods from $49 billion in 2019 to $25 billion in 2020.
He added that the focus of imports was likely going to be on necessaries, while import duties on such items may be at concessionary rates.
According to Agusto, currency depreciation would boost the Naira equivalent of import duties.
We estimate federal government revenue of N3.2 trillion. We also estimate that the federal government will borrow about N4 trillion, some in foreign currency and others in local currency.
Historically, the level of borrowing that they have been able to raise historically has been about N3 trillion yearly. So, we are even pushing it further a bit to say that they are going to borrow N4 trillion.
So, we expect an aggregate spending of N7.3 trillion. Let’s note that the government has always promised large amount of spending, but they have been able to finance between 60 and 70 per cent of it historically. So, this year is not going to be different.
But what would they be spending money on? There are some obligatory payments that the government has to make. What are these payments?
They pay interest on their loans, salaries and pensions of their workers and statutory transfers, that is, what they are obliged by law to transfer to other tiers of government.
