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Banks’ profits to drop further in 2020 due to COVID-19 – Agusto

Banks’ profits to drop further in 2020 due of COVID-19 – Agusto

The banking industry will post lower profits this year due to the ravaging impact of the coronavirus pandemic, business intelligence and rating agency, Agusto & Co, has said.

Bode Agusto, the agency’s founder, said Thursday during a virtual presentation titled “How Will COVID-19 Impact the Nigerian Economy” that there will be a need for a number of commercial banks to raise equity so as to lower their leverage to acceptable levels.

“The banking industry will continue to deliver 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.”

Mr Agusto forecast that imports will plunge by almost half its value in 2020 from $49 billion in 2019 to $25 billion.

Read also: COVID-19 will throw sub-Saharan African economy into first recession in 25 years in 2020 —W’Bank

According to him, imports will focus on basic goods with import duties on them anticipated to be charged at concessionary rates.

“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.”

Agusto, who was formerly the director general of the budget office, said that obligatory payments including debt servicing, employees’ salaries and pensions and statutory transfers would take a huge portion of government spending this year.

Ronald Adamolekun

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Ronald Adamolekun

Ronald Adamolekun is a creative writer with a mixed bag of experience in fields as diverse as data journalism, financial reporting and editing.

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