Analysis of Liquidity Levels in Nigerian Banks for Q1 2024

The Nigerian banking sector has seen a significant increase in liquidity in the first quarter of 2024, with United Bank for Africa (UBA) Plc, Access Holdings Plc, and FBN Holdings emerging as the most liquid banks, according to a BusinessDay analysis.

The cumulative cash and cash equivalents of the top 10 listed Nigerian banks rose to N20.7 trillion in Q1 2024, a substantial 117.6 percent increase from the same period in 2023. This surge in liquidity has been attributed to various factors, including improved cash flow from operations and increased after-tax profits.

Ngozi Odum, a banking analyst at CardinalStone Partners Limited, emphasized the importance of cash and cash equivalents for banks, stating that it signifies better liquidity. However, the key lies in how banks utilize this cash – whether it is invested in money market instruments to earn interest or left idle in accounts.

Oluwaseun Arambada, a research analyst at FBNQuest, highlighted the significance of maintaining an appropriate liquidity level in banks. While having excess cash can be beneficial, it may also be inefficient if not deployed for company growth or rewarding investors with dividends.

The analysis of individual banks revealed some interesting insights. United Bank for Africa (UBA) led the pack with N4.87 trillion in cash and cash equivalents, followed by Access Holdings with N3.9 trillion and FBN Holdings with N3.45 trillion. These banks also saw significant increases in after-tax profits, reflecting their strong financial performance.

Overall, the surge in liquidity among Nigerian banks bodes well for the sector, providing them with the means to meet debt obligations, invest in growth opportunities, and reward shareholders. As the banking industry continues to evolve, maintaining a healthy balance of cash and investments will be crucial for sustained success.