Inside details of five Nigerian banks making inroads in African market

Nigerian banks are expanding their reach across the continent through a series of acquisitions of smaller banks, in a drive to dominate the African financial landscape, BusinessDay’s findings have revealed.

Nigerian banks have been expanding their operations in Africa, either organically or through acquisitions, and have seen significant progress in recent years.

This expansion has given them a strong presence in key African markets and access to growing economies.
According to Sesan Adeyeye, portfolio manager at Asset & Resource Management Holding Company (ARM HoldCo), the primary factors driving Nigerian banks’ expansion into the African market are valuation, global reach, and partnerships.

“Expanding into African countries improves banks’ valuation by increasing their presence across the continent. It also brings diversification benefits, synergistic advantages, and revenue stability, enabling them to extend their services beyond core banking offerings,” Adeyeye said.

The rise of pan-African banks, as noted by the International Monetary Fund (IMF), is a testament to the increasing economic integration across the continent, offering numerous opportunities and advantages.

“Moreover, this expansion provides increased reach and valuable partnerships, especially during a period when the African Continental Free Trade Area (AFCFTA) has been in focus,” Adeyeye added.

Some Nigerian banks have pursued organic growth by establishing subsidiaries in foreign countries and growing them from scratch, while others have opted for inorganic expansion through mergers and acquisitions.

Tesleemah Lateef, a research Analyst at Cordros, pointed out that the expansion of Nigerian banks into the African market is not driven by any specific major reason.

“Instead, most of these banks have it stated in their objective plan to expand to the African market as a growth initiative, not necessarily for immediate profit,” Lateef said.

According to Lateef, “The management sees the expansion as a positive step that aids in diversification.

“By expanding, banks are not only growing but also able to diversify their operations. This diversification serves as a protective measure against shocks, which is another reason why Nigerian banks are making strides in the African market,” Lateef said.

In recent years, Nigerian banks have demonstrated aggressiveness in expanding their footprint across Africa, often acquiring or merging with smaller banks in various African countries.

For instance, Access Bank, a major Nigerian bank, has recently acquired five subsidiaries of Standard Chartered in African countries, expanding its presence in Angola, Cameroon, The Gambia, and Sierra Leone, as well as its consumer, private, and business banking business in Tanzania.

“By expanding into other African countries, Nigerian banks demonstrate their commitment to growth and appeal to potential investors, this strategy prevents them from relying solely on the Nigerian market,” Adeyeye said.

Lateef noted that the approach to expansion differs among banks, depending on their management style. Some banks exhibit more aggressive tactics, while others take a more conservative approach. This can be observed in the pace at which Access Bank is pursuing its expansion strategy.

Analysis by BusinessDay shows that Nigerian banks with operations in African countries, including First Bank, UBA, GTco, Access, and Zenith Bank, recorded N3.59 trillion in revenue from their Nigerian subsidiaries in comparison to N2.83 trillion in 2021.

Additionally, N878.19 billion was recorded from their other subsidiaries in the rest of Africa, compared to N701 billion in 2021.

In terms of their revenue, Adeyeye noted that most of their revenue is gotten from Nigeria, but there is reduced concentration risk on the Nigerian market alone.

While the pace and approach of continental expansion vary among different Nigerian banks, venturing into other African markets enables them to diversify assets and balance profitability against results in Nigeria, despite the challenges and benefits that come with it.

Zenith Bank, Guaranty Trust Holding Company Plc (GTCO), United Bank of Africa (UBA), Ecobank, and Access Holding Plc collectively incurred impairment costs of N320 billion at the beginning of the year, according to BusinessDay’s calculation.

“Lately, the global market has experienced volatility, especially in emerging markets. Some countries, like Ghana, have faced financial instability, attracting attention at the beginning of this period. However, such instances are not unique, and despite the challenges, banks remain hopeful that stability will eventually return leading to more investment across the board,” Adeyeye said.

Lateef stated that the diversification of shocks allowed Nigerian banks to withstand the impacts of the Ghanaian bonds’ shocks.

“Regarding competition, if the benefits outweigh the costs, it is anticipated that more Nigerian banks will enter the African market, especially since Access Bank is setting the pace,” Lateef said.

African market

Access Holdings Plc

Access Holdings Plc, is a multinational commercial bank established in 1989. It operates subsidiaries in various African countries, including the Democratic Republic of the Congo, Ghana, Kenya, Nigeria, Rwanda, Gambia, Sierra Leone, South Africa, Zambia, and the United Kingdom.