The European Investment Bank published its assessment of African banks last week, using its “Financing in Africa Survey 2023,” to provide insights into the evolving financial landscape across the African continent.
The analysis, conducted in partnership with 33 leading banks across Africa, showed diverse challenges and confirms resilience of the African banking sector.
The report includes a financial conditions index for Africa, which revealed that financial conditions have tightened over the last couple of years as interest rates increase but exchange rates weakened.
Also, the crowding out index, which captures the extent to which private borrowers are competing for bank loans with domestic governments, showed that crowding out pressures remain elevated.
Despite these challenges, the survey showed the “remarkable resilience of African banks.”
Higher interest rates and expanded business volumes have driven substantial profit growth. However, the cost of foreign currency and the expense associated with hard currency bond issuance remain persistent challenges.
While non-performing loans continue to be a concern, there is a positive trend emerging with the reduction in corporate and SME loans under restructuring or subject to moratoria.
An impressive 90% of the surveyed Sub-Saharan African banks are actively investing in digital services and staff training.
The survey also emphasized that African banks remain exposed to physical climate risks due to both sovereign and industry lending.
At country-to-country level, how do African banks perform, especially with respect to giving loans? We used data from the report to compare Nigerian banks against banks in selected African countries on specific indicators, including how much loans they give to the private sector, a measure of economic viability, and non-performing loans.
This table shows what we found:
– Total asset (million dollars)
Nigeria: 142.6
South Africa: 397.1
Kenya: 57.9
Ghana: 30.4
Cameroon: 11.6
Cabo Verde: 3.2
Mauritius: 46.2
– Credit to private sector (% of GDP)
Nigeria: 12.2
South Africa: 93.4
Kenya: 29.6
Ghana: 10.8
Cameroon: 13.2
Cabo Verde: 55
Mauritius: 86
– Non-performing loans (% of total loans)
Nigeria: 4
South Africa: 4.5
Kenya: 13.1
Ghana: 14.8
Cameroon: 13
Cabo Verde: 7.2
Mauritius: 5.8
– Loans to deposit (%)
Nigeria: 56
South Africa: 95.6
Kenya: 86
Ghana: 18.1
Cameroon: 83.6
Cabo Verde: 64.5
Mauritius: 62
– Annual credit growth (%)
Nigeria: 10
South Africa: 8.9
Kenya: 12.7
Ghana: 20.9
Cameroon: 5
Cabo Verde: 5.8
Mauritius: 12
– Return on equity
Nigeria: 17
South Africa: 17.7
Kenya: 27.5
Ghana: 14
Cameroon: 16.7
Cabo Verde: ??
Mauritius: 12.8
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