Banking
From The Report: Nigeria 2015
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Nigeria’s banks have been through some challenging times in recent years, but for all their travails, they have turned in an impressive performance and continue to present a compelling narrative to foreign investors. However, the challenging times are not over just yet. West Africa’s largest banking sector – accounting for74% of regional banking assets and now fully recovered from its last crisis in 2009 – is facing structural changes that affect its traditional profitability drivers. The recent benchmark interest rate hike by the Central Bank of Nigeria, to 13%, and the devaluation of the naira, down by nearly 30% in just three months to $1:N198, are likely to affect debt servicing on loans denominated in foreign currency. As banks increase their exposure to large corporate deals at ever slimmer margins, they are being prodded to expand their retail and SME loan books to offset drops in traditional revenue streams. The resolution of the last banking crisis, and likely arrival of new players, should boost competition and prompt lenders to develop the data ecosystems needed to tap the retail market.

This chapter contains a viewpoint from Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), and an interview with Daniel Monehin, Division President, Sub-Saharan Africa, MasterCard.

Articles from this Chapter

Overview

Nigeria’s banking sector looking ever healthier after recovering from the last crisis
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Nigeria’s banks have been through some challenging times in recent years, but for all their travails, they have turned in an impressive performance and continue to present a compelling narrative to foreign investors. However, the challenging times are not over just yet. West Africa’s largest banking sector – accounting for 74% of regional banking assets and now fully recovered from its last crisis in 2009 – is facing structural changes that affect its traditional profitability drivers. Regulatory…

Viewpoint

Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), on the bank’s role in driving growth in specific sectors
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For some time, the dominant school of thought regarding central banking was that focusing on low inflation will eventually lead to greater growth, an increase in employment-generating activities and poverty reduction. However, early and recent evidence of central banking in places such as the US, the UK, Japan and France indicates that supporting selected economic sectors using direct methods of intervention has been an essential task of their central banks. As Gerald Epstein encapsulates in “Central…

Analysis

A policy shift brings new challenges to profitability in Nigeria’s banking sector
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Nigerian banks have been undergoing a structural shift in their business models since 2013 – the first full year since the end of bad debt sales to the Asset Management Corporation of Nigeria (AMCON). The new rules issued that year have significantly affected traditional sources of profit for commercial banks, including net interest margins and fee revenues, and are prompting lenders to find new ways of driving profitability over the medium term. This will likely entail a stronger focus on lending,…

Interview

Daniel Monehin, Division President, Sub-Saharan Africa, MasterCard: Interview
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Interview: Daniel Monehin What impact will national ID cards have on electronic funds transfers within Nigeria? DANIEL MONEHIN: Our partnership with the National Identity Management Commission has been in the works for years, and anything of this complexity will take time to fully develop. Our role is limited completely to the payment side of things, as this is where our competency lies. The fact that we are on the National eID Card does not mean that we have access to the biometrics of Nigeria.…

Analysis

As Nigeria’s banks build their risk assets, new data on customers may help rejuvenate lending
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With regulatory reforms threatening to curb banks’ traditional sources of profit, lenders will need to create risk assets to maintain and expand their margins. Chief among these will be lending to retail customers and small and medium-sized enterprises (SMEs), which carry significantly higher interest rates than the limited and heavily banked blue-chip corporate market. While such higher-risk lending has been constrained by poor visibility and a general lack of information on applicants, the availability…

Analysis

New owners of privatised electricity assets seek to meet arrears and fund their expansion
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The final transfer of privatised electricity assets to successful bidders in November 2013 marked a key moment in demonstrating that Nigerian banks can provide significant long-term funding to a structurally important sector. The acquisitions were financed primarily through debt, while international investors and banks largely stayed on the sidelines. Indeed, of the more than $3.2bn that was spent to acquire the 14 successor companies to the Power Holding Company of Nigeria and the Egbin power plant,…

Analysis

Kick-start: The government launches new efforts to boost access to mortgages for the middle class
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Despite a housing gap estimated at 17m units, the provision of affordable long-term financing has remained virtually non-existent. By 2013 there were a mere 20,000 mortgages outstanding, according to the Ministry of Finance (MoF), at best-case interest rates of 19% over 10 years. In parallel to government efforts to promote the construction of more affordable housing, authorities are radically restructuring the housing finance segment. Having raised the capital requirements for primary mortgage institutions…