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HomeTop NewsUBA, Access, Zenith, others woo customers for N2.7 trln currency outside financial...

UBA, Access, Zenith, others woo customers for N2.7 trln currency outside financial system

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The United Bank for Africa (UBA), Access Bank, Zenith Bank, and other Nigerian banks are competing to attract up to N2.7 trillion that’s outside the formal sector, taking advantage of the six-week window citizens have to replace old currency notes with the new redesigned ones.

Lenders including Zenith Bank, First Bank Limited and United Bank for Africa (UBA) have already begun reaching out to existing and potential clients online and in-person to turn in unbanked cash.

The Central Bank of Nigeria (CBN) in October announced a plan to replace N200-, N500- and N1,000 notes from December 15 with new redesigned currency notes.

The move to switch the notes may lead to chaos in a country where the majority of the population lives in rural areas away from bank branches. In 2016, Indian Prime Minister Narendra Modi’s move to ban high-value currency led to a prolonged scramble for cash and slowed economic growth.

The old bills, which amount to 85 percent of currency in circulation, will cease to be legal tender on January 31. Access Bank, the biggest lender by assets, is looking to attract as much as 30 percent of the funds, in part through an expanded network of 200,000 agents to reach rural Nigerians who live far from bank branches.

“We are actually going to rural markets and rural areas with our agents now to encourage people to open accounts and deposit cash,” Access Bank head of retail marketing and analytics, Chioma Afe said in a phone interview.

Some have argued that six weeks isn’t enough time for Nigerians, 45 percent of whom lack bank accounts, to turn in their cash, especially given the country has just 4.5 bank branches per 100,000 people.

Liquidity push

The prospect of potentially trillions of naira in fresh deposits has sparked competition among banks looking to boost liquidity. All are building out their agent networks — men and women who sit in markets across the country selling mobile-phone credit and accepting deposits or withdrawals on behalf of banks.

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“Banks with the largest agency network are the ones likely to get more of the funds, especially the small depositors,” said a banking analyst at Vetiva Capital Management in Lagos, Joshua Odebisi.

“Being able to attract those cheap savings and current accounts will increase their capacity to create loans at a cheaper rate.”

The industry is facing a rising cost of funds amid climbing interest rates — up 500 basis points since May. In September, the central bank increased the cash reserve ratio — the amount of money banks have to keep at the central bank — to 32.5% from 27.5%, further curbing liquidity.

The Abuja-based regulator has ordered all banks to open branches on Saturdays to accommodate the anticipated deluge of customers.

United Bank for Africa, like many of its peers, has begun a marketing push to urge customers to replace their notes early in order to “avoid the rush,” the chief operating officer, Alex Alozie said in a phone interview. Fidelity Bank has extended banking hours on weekdays in addition to banking on Saturdays, the lender said in emailed comments.

The country’s banks held N42 trillion in deposits as of June, according to the central bank.

Capturing a “significant chunk” of the notes outside the banking system will help boost liquidity, provided it doesn’t provoke a further hike in the cash reserve ratio by the central bank to tame inflation, Timothy Wambu, analyst at ABSA Bank, said.

“The cheap deposits, assuming they are not interest bearing, would be a boost in lowering their cost of funds.”


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