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Nigerian Banks: Leveraging global expansion for growth

Nigerian banks have, for over a decade, demonstrated that indigenous brands can hold their heads up on the global stage, sealing acquisition deals across regions. From Access to Fidelity Bank and United Bank for Africa to Zenith, the craving for global dominance spiked from last year, with the indigenous financial giants taking their services beyond Africa, a continent they have long ‘conquered’, to Europe and Asia where they are currently cutting new grounds, JOSEPH CHIBUEZE writes.

Nigerian banks have always sought opportunities for offshore expansion to boost their revenue and attract investment. Lately, though, the drive for global opportunities to hedge domestic risks has intensified. In 2023, three foremost banks, as part of their expansionary initiatives, took bold steps that are expected to unlock value for them in the international market. The foremost banks in this league are Fidelity Bank, Zenith Bank, and Access Bank.

Recently, Fidelity acquired the United Kingdom subsidiary of Union Bank to tap into the UK market and announced plans for further expansion on the African continent while Zenith Bank signed an MoU with the French government to commence operations in France. Its inroad into the African market, Access Bank has announced plans to strengthen its Asian footprint.

This new drive is timely. Last year, the governor of the Central Bank of Nigeria, Yemi Cardoso, informed the industry that the apex bank is finalising plans for a recapitalisation exercise for Nigerian banks. Since then, there have been feverish moves by banks to ensure they meet the new capital requirement when the exercise eventually kicks off.

The CBN governor said the new exercise is necessary to strengthen banks’ capacity to support the country’s drive to become a $1 trillion economy by 2026. Indeed, the current capital base of N25 billion or about $33 million for the tier-1 banks is low to support an economy of $1 trillion. The economic downturn and especially the devaluation of the naira in recent times have hurt the valuation of Nigerian banks.

As banks strategise in readiness for the recapitalisation exercise, it has become clear that they can no longer rely only on the domestic market for growth. Forward-thinking banks are thus diversifying their geographic footprint to access new sources of revenue to reduce their reliance on the domestic market. Such expansion also helps to mitigate risks associated with economic downturns or regulatory changes.

To be sure, even before the recapitalisation fever, leading Nigerian banks have recognised the potential of global expansion and have been strategically positioning themselves for international growth through strategic expansion initiatives.

For instance, Fidelity’s acquisition of Union Bank UK had been in the works long before the recapitalisation proposal by the CBN. Talks started in 2022. By expanding their presence beyond national borders, these banks are tapping into new growth opportunities, diversifying their revenue streams, and contributing to the development of the Nigerian economy. Such expansion involves establishing a presence in key international financial centers, expanding branch networks, and pursuing strategic partnerships and acquisitions.

The commencement of the African Continental Free Trade Area (AfCFTA) agreement in 2021 was a great opportunity for Nigerian banks to intensify their expansion drive on the continent. Such expansion would enable them to take advantage of the inherent opportunities of free borderless trade among African countries. And some of them did immediately tap into the opportunities.

Equally of note is the ja-pa (mass migration of Nigerians abroad) syndrome, which has created a viable market for Nigerian banks to tap into the opportunities presented by the growing population of Nigerians abroad who regularly remit monies home or invest in assets in Nigeria.

Access Bank

Access Bank

Access Bank is one of the banks that already operates subsidiaries outside Nigeria – in China, India, Lebanon, the United Arab Emirates, the United Kingdom, Kenya, South Africa, Rwanda, the Republic of the Congo and Sierra Leone among other locations on the continent and beyond helping to diversify its revenue.

In 2022, for instance, the bank reported earnings from its subsidiaries in Africa over N207 billion, a 250 per cent growth over its revenue of N83 billion from its African operation in 2021.

Guaranty Trust Holding Company also has a strong presence across Africa in Tanzania, Uganda, Cote D’Ivoire, Ghana, Liberia, Rwanda and Kenya among others. It also has a presence in the United Kingdom. The offshore operations have been contributing to its top-line earnings in recent years.

In 2022, GTCO made N126.95 billion from the rest of Africa, N111.3 billion in 2021, N87.22 billion in 2020, and N79.4 billion in 2019. In 2022, UBA’s total assets from its African operation were more than N3.92 trillion.

The bank has consistently grown its offerings across its African operations, which is reflected in its strong earnings from the rest of Africa. Zenith Bank is also a strong player offshore across Africa, Asia and Europe and has continued to explore opportunities for further expansions globally.

Last year, however, marked a new phase in the global expansion drive of Nigerian banks as they look beyond Africa to hedge their risks as well as build enduring business partnerships. Some of them took firm steps to tap into other global markets. Fidelity Bank, for instance, acquired the United Kingdom subsidiary of the Union Bank.

Following the 100 per cent acquisition of Union Bank UK, Fidelity also announced plans to acquire other banks in six African countries.

“The strategy is for us to move our footprint outside Nigeria and compete favourably with our peers. In the next three years, we should be able to be in six countries by doing at least two yearly,” said the CEO of Fidelity Bank, Nneka Onyeali-Ikpe.

Fidelity’s total assets grew by over 56 per cent to N6.23 trillion in the past three years, since her arrival. The bank’s recently released condensed unaudited financial statement for 2023 was outstanding. PBT grew by 128 per cent to N122.15 billion from N53.68 billion in 2022.

Top-line earnings grew by 64 per cent to N552.77 billion from N337.05 in 2022. Its net interest income was 82 per cent higher than the 2022 figure. On the strength of Fidelity’s recent performances, for two consecutive years, the bank has emerged as the company with the highest earnings per share on the NGX, based on half-year financial figures.

NGX Group BuildingNGX Group Building

NGX Group building

It is also one of the most active stocks on the Exchange. It is the fifth most traded stock on the NGX over the past three months (December 19, 2023, to March 19, 2024) and has traded a total volume of 1.55 billion shares in 19,384 deals in that period.

Late in 2023, Zenith Bank announced plans to expand to France. A spokesman for the bank announced that Zenith has signed a “memorandum of understanding (MoU) with the government of France, signalling the commencement of the issuance of a banking licence to Zenith to commence operations in France”.

The French subsidiary, when operational, will join its other subsidiaries in the United Kingdom, the United Arab Emirates and China. Access Bank also announced a further global expansion drive. It said it plans to expand into Asia to enrich its global portfolio.

Apart from direct international acquisitions, another key approach adopted by leading Nigerian banks is to forge strategic partnerships and alliances with international financial institutions. These partnerships provide Nigerian banks with access to global networks, expertise, and resources, enabling them to offer a wide range of financial products and services to customers worldwide.

For one, GTCO established strategic alliances with international banks and financial institutions, including Citibank and Standard Chartered Bank. These partnerships have enabled GTBank to expand its global reach, attract foreign investment and provide tailored financial solutions to its corporate and institutional clients operating internationally.

In an increasingly digital world, Nigerian banks are leveraging technology and innovation to enhance their competitiveness in the global market. With the rise of digital banking and fintech disruption, banks are investing heavily in digital transformation initiatives to streamline operations, improve customer experience, and drive business growth.

Fidelity Bank has been at the forefront of digital innovation, offering a wide range of digital banking solutions to its customers, including internet banking, mobile banking, and digital payment platforms. By embracing digital technologies, the bank aims to expand its reach beyond traditional banking channels, cater to the evolving needs of tech-savvy customers and position itself as a leading player in the global digital banking landscape.

As Nigerian banks venture into international markets, they must navigate a complex regulatory landscape and manage various risks associated with cross-border operations. Compliance with international regulatory standards and best practices is essential to gaining the trust and confidence of global stakeholders, including investors, regulators and customers.

However, Fidelity and others have shown that they are committed to upholding high standards of corporate governance, risk management and regulatory compliance to ensure their sustainable growth and resilience in the global market.

By adopting robust risk management frameworks and adhering to international regulatory requirements, these banks can mitigate risks, build credibility and foster long-term relationships with stakeholders across the globe.

By leveraging regional integration, forging strategic partnerships, embracing digital innovation and ensuring regulatory compliance, Nigerian banks can strengthen their competitive position, drive sustainable growth and contribute to the economic development of Nigeria, the African continent and globally.

As they continue to expand their presence on the global stage, these banks are poised to emerge as key players in the increasingly interconnected and dynamic world of international finance. And they will no doubt remain attractive to investors and investments as they actively position themselves for success in the global market and when recapitalised will contribute to the development of the $1 trillion economy as proposed by the government.

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