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Can Access Bank’s acquisition in Botswana spotlight intra-African payments?

Trade without payment is hard to imagine, and with the African Continental Free Trade Area (AfCFTA) agreement, the need to deepen intra-African payments to match anticipated trade volumes has become a focal issue.

When Access Bank Plc, one of Nigeria’s leading banks announced it had acquired 78.15 per cent shareholding in the African Banking Corporation of Botswana Limited (BancABC Botswana), it brought to the fore, conversations on alliances that need to be formed by financial institutions across the continent for trade to thrive.

Payment has always been the lifeblood of trade, from the days of barter to cash and now electronic payment channels. The same is true for intra-African trade, which covers 55 countries with varying financial and monetary systems. Consequently, payment is critical on the list of items that will drive AfCFTA’s future success, as noted in an article on the World Economic Forum’s website.

A SWIFT Africa Payments White Paper also notes that as Africa pursues deeper economic integration, facilitation of payments across borders and integration of financial markets can no longer be ignored.

“Our growth and diversification strategy is also underlined by the recent expansion of our regional footprint where we continue to monitor opportunities,” Herbert Wigwe, GMD/CEO, Access Bank, said.

Read Also: Access Bank signs merger agreement with Zambian bank

Wigwe had stated that across Africa, there are opportunities for the bank to expand to high-potential markets, leveraging the benefits of the African Continental Free Trade Area agreement (AfCFTA). AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for Africa.

According to Wigwe, across Africa, there is an opportunity for the bank to expand to high-potential markets, leveraging the benefits of AfCFTA. He said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for Africa.

According to him, Africa has enormous potential and there are opportunities for an African bank that is well run, that understands compliance and has the capacity to support trade and the right technology infrastructure to support payments and remittances, without taking incremental risks.

“We believe that we are best positioned to basically do all of that. Our focus is to become an aggregator in Africa and we are building a global payment gateway and providing trade finance support and correspondent banking across the continent. We are focusing on the key markets.

“The approach would always be that in the country we wish to go to, that we have the right skills. We would not just be a drop in the country in which we are present, we would make sure that we have an impactful presence in each of the major countries in which we are present.

As Africa pursues deeper economic integration, facilitation of payments across borders and integration of financial markets can no longer be ignored

“In doing this, we are also mindful of the country we are going to so as to make sure that it is of benefit to the bank. As we do this, we are working with our friends and partners,” he said.

By 2023, Access Bank aims to have consolidated its position as Africa’s gateway to the world with over 100 million customers.

The growth projection is attributed to the bank’s innovative payments solution, with Wigwe saying, “Access Bank is set to revolutionise the payment and banking landscape in Africa.”

The growth of e-banking start-ups and solutions has proven to be incredibly beneficial for the Nigerian economy. Given that these digital innovations provide much-needed solutions to a number of issues customers of the traditional banking systems have hitherto experienced, there has been an unmistakably positive effect across various sectors, according to the bank.

“As an established leader in the Nigerian and indeed African banking industries, Access Bank has embraced digital technology to propel both its sustainability targets and its African gateway strategic drive,” the bank stated.

This was evident in its partnership with the Africa Fintech Foundry (AFF), aimed at nurturing the next generation of cutting-edge financial-technology firms. The AFF is a pan-African accelerator designed to find and invest in start-ups that implement a global viewpoint while still focusing product offerings on Africa.

Access Bank plans to harness the very best Nigeria has to offer, working closely with them to make Nigeria a retail banking powerhouse.

“Over the last couple of years, Access Bank has focused its expansion efforts on powering digital payments across Africa. The bank launched its AccessAfrica product, a payment system that serves to facilitate cross-border trade and non-trade payments,” it added.

All of these also follow its recent Group reorganisation, which it says was aimed at capturing the strategic opportunities in payments, agency banking, and insurance across the continent that will further enhance the growth profile and diversification of its business.

Sunday Ekwochi, company secretary, Access Bank had explained following the acquisition that BancABC Botswana is the fifth largest bank in Botswana as well as a well-capitalised franchise poised for growth in its local market.

“The new acquisition will form part of the Bank’s nexus for trade and payments in Southern Africa and the boarder COMESA trade region. BancABC Botswana’s achievements in the retail banking space will provide an opportunity for the bank to deploy its best-in-class digital platforms and product suites to the benefit of BancABC Botswana’s customers and enable it to complete strongly across its core business segments,” he explained.

Wigwe, Access Bank’s CEO had also said the successful conclusion of the transaction would provide significant synergies by combining BancABC Botswana’s strong retail banking operation with Access Bank’s wholesale banking capabilities.

“It will also strengthen the quality of earnings through revenue diversification and growth in the corporate and SME banking segments for BancABC Botswana. The combination is another step towards our broader vision of becoming the World’s Most Respected African Bank,” he said.

Access Bank already has subsidiaries across Sub-Saharan Africa and Europe, providing financial and banking services. The bank’s subsidiaries include Access Bank (Gambia) Limited, Access Bank (Sierra Leone) Limited, Access Bank (Zambia) Limited, Access Bank (UK) Limited, Access Bank (Ghana) Limited, Access Bank (D.R. Congo), Access Bank (Rwanda) Limited, Access Bank (Guinea) Limited, Access Bank (Kenya) Limited and Access Bank (Mozambique) Limited.

According to Wigwe, the target is for the bank to establish its presence in 22 African countries as well as some strategic locations outside the continent so as to diversify its earnings and take advantage of growth opportunities in Africa.

Sarah Alade, a former deputy governor of the Central Bank of Nigeria, Dr. had noted that a growing number of studies had reviewed the effects of cross-border banking on financial intermediation and efficiency, and found the existence of a positive relationship.

According to her, improvement in the ability of households and firms in a country to access finance and the actual usage of banking services, one way in which the intermediation functions of banks are measured, is enhanced by bank entry. Additionally, she pointed out that banks are in a better position to lend if they are able to mobilise deposits and increase their asset base.

There is general agreement in the literature that the entry of foreign-owned banks increases competition and efficiency in the banking sector of the host country, she said.

This is mainly because the entry may reduce risk exposures for the banks through greater geographical and sectoral diversification, and enlarge the aggregate quantity of capital invested in the banking sector. “Researchers and analysts encourage entry of banks as a means of strengthening weak and inefficient banking structures, particularly in emerging economies. Banks that expand internationally are typically more efficient, better capitalised and come from countries with a more developed banking system,” she added.

The acquisition by Access Bank came a few weeks after it announced that it had successful issued $1 billion ($500 million apiece) tier-1 Eurobond, under its medium term note programme.

The bank had explained that the move was in line with its commitment to execute its vision to become the “World’s Most Respected African Bank.”

According to Wigwe, the success of the transaction, which he said was the first in the Nigerian banking industry and the first of its kind in Africa outside of South Africa, would significantly enhance the bank’s tier 1 and total capital ratios ahead of Basel III implementation in Nigeria. The fresh capital would provide room for significant growth through ongoing execution of the bank’s strategic objectives.

While the SWIFT white paper noted that transaction costs remain high, at least partly because a large proportion of settlement processes – 48% – within Africa involve banks outside of Africa, intra-Africa expansions by financial institutions like Access Bank could over time, lower these costs and make trading across Africa more seamless.

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