Nigeria’s banking sector is increasingly adopting cautious investment strategies as economic uncertainty deepens, with financial institutions shifting focus from lending to safer assets like treasury bills and bonds.
Speaking in an interview with ARISE News on Thursday, financial analyst Mutar Mohammed said the current behavior of banks reflects growing concerns about the stability of the economy.
According to him, “banks are seeing the economy as very fragile, and so they are not really putting in so much of their funding in terms of lending.”
He explained that this cautious stance is evident across major financial institutions, where lending activities have slowed significantly compared to previous years.
Highlighting recent financial reports, Mohammed noted that some banks recorded minimal growth in lending, describing it as “very, very poor… about 1. something percent a reduction year-to-year.”
Instead of extending credit, he said banks are increasingly channeling funds into safer instruments, noting that “banks are now beginning to look at safe havens… they are trading the treasury bills and the fixed income space to get growth.”
This shift, he explained, is largely influenced by rising interest charges within the sector, adding that “their interest charges went up, which is something that we’ve seen in the banking sector.”
Mohammed further observed that government borrowing trends are also shaping this strategy, as banks take advantage of attractive yields in the bond market.
“The government is also leaning towards borrowing… definitely, that’s a strategy; they will buy more bonds,” he said, emphasizing that returns in the fixed-income market remain appealing.
While he acknowledged that this approach may boost short-term profitability, he cautioned that it is not sustainable for long-term economic growth.
“The long-term strategy of any bank is to grow the economy,” he stated, stressing the importance of supporting businesses through lending.
He expressed optimism that ongoing recapitalization efforts would eventually redirect funds into productive sectors, particularly small and informal businesses that rely heavily on bank financing.
Mohammed concluded that although the current investment strategy reflects economic realities, a shift back to lending will be critical for sustainable growth, noting that recapitalization could play a key role in restoring that balance.
By Ojo Triumph
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