Nigerian banks’ profits still low - CBN

Gbola Subair, Abuja - 13.02.2008

Profits made by banks in Nigeria are still low as the shareholders’ funds of 11 banks are expected to be over $1 billion by the end of this month.

The CBN also explained why banks lending to the economy is still high.

Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, disclosed this while presenting a paper on ‘Banks and the National Economy: Progress, Challenges and the Road Ahead’ at the national seminar on banks and the Nigerian economy and the launch of N50 billion Micro-credit Development Fund on Tuesday in Abuja.

Contrary to general opinion that banks make super profits, Professor Soludo said the reverse was the case, noting that returns on investment in the banking industry were relatively small compared to the funds invested in the industry.

Giving an analogy, the apex bank boss said a situation where a bank invested N100 billion and recorded a profit of just N10 billion was not good enough.

The situation notwithstanding, Prof Soludo said there would be a light at the end of the tunnel as there was still a huge potential for significant growth in the industry.

Explaining why lending was still high, the CBN governor said the cost of fund was still high, adding that in a situation where the business environment was risky, banks priced risks differently for different borrowers.

Apart from this, he said the poor infrastructure in the country meant that banks would be operating at a very high cost, adding that the high overhead costs of banks especially the emoluments also added to the problem of high lending rates by banks.