Growing the banking sector: financial intermediaries play a crucial role in economic growth and the establishment of an effective financial system will lead to a healthier economy.

Author:Aboubacar, Sani

FINANCIAL SERVICES IN NIGER work under the standard regulatory framework governing banking institutions in general, that is collecting deposits from individuals and companies and using them to finance other individuals and companies by offering their customers goods and services.

Financial services are broadly dominated by the banking sector, which holds over 60% of financial assets. As of 30th June 2016, the Nigerien banking landscape spanned 12 banks (in addition to the Central Bank), six insurance companies and over 50 micro-finance institutions.

The financial system is made up of 10 mainstream banks and one specialist bank: the Banque Agricole du Nigei (BAGRI). Four large banks, namely the Banque Internationale pour l'Afrique au Niger (BIA), the Societe Nigerienne de Banque (SONIBANK), the Bank of Africa (BOA) and Ecobank hold over 80% of the market share between them, in more or less equal proportions. According to the AfDB, the banks and financial institution make up the largest part of the financial sector on which the finance for investments in the country's development depends.

However, the Nigerien financial system succeeds only very marginally in fulfilling its role of driving growth and development in the economy. "The Nigerien banking system is a fluid system, with short-term funding. Where there is short-term funding, there are difficulties in long-term financing. In other words, banks do not have funds to grant longer term loans," explains the network director of the Banque Islamique du Niger (BIN).

Increased banking sector business

The banking sector has been seeing steady growth over the past year. Their aggregated balance sheets grew 6.7% in 2015, to |1.6bn. Loans increased 13.2% although much of that was due to government lending.

Conversely, deposits increased only slightly (2.3%), particularly customer-collected deposits (1.4%) while government deposits increased by 6.8%. Consequendy, the Nigerien state went from being a net creditor to the banking sector to being a net borrower.

Interestingly, Nigerien banks have been relying more on funding from the Central Bank, which went from SI90m to $254m (up 33.1%).

Loans are still mostly granted as short or medium term, representing respectively 53.8% and 42.5% of the total loans issued to customers.

The average solvency ratio took a sharp dive from 16.2% to 11.9% on account of the significant increase in lending to the economy and the deterioration of the loan books, with...

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