Nigerian banks are well positioned for African expansion, says Moody’s
Moody’s Investors Service On Wednesday said that Nigerian banks expanding into the rest of the continent or diversifying into other financial services will be better insulated from shocks than they were during the global financial crisis.
Nigeria’s Access Bank and Guaranty Trust Bank are following peers FBN Holdings and Stanbic IBTC Bank to transform into financial holding companies that will protect their local banking assets from other businesses.
Access Bank plans to open a payments unit and increase its African footprint, while GTB is looking to establish subsidiaries in asset management.
The Central Bank of Nigeria (CBN) modified rules in 2010 after the global debt crisis and the abuse of client funds brought the industry to verge of collapse.
Peter Mushangwe, a banking analyst at Moody’s said, “Regulation this time will be tighter and regulators will ringfence local depositors and senior creditors.
“In 2008 and 2009, Nigerian banks funded their non-banking activities using the deposits originated in their Nigerian operations.
Nigerian banks usually expand into West Africa and Central Africa before moving to East Africa.
“Some of the neighboring countries have weaker operating conditions and regulations and therefore present risks.
“However, due to the general low penetration and growing per-capita income, they also present long-term opportunities.
“Diversification will create resiliency in both revenue generation capacity and asset quality for banks.
“Nigerian banks are facing challenges in revenue growth due to the difficult operating environment,” Mushangwe said.
~With Bloomberg Report