FELICIA ITEJI
Nigerian banks have long sought avenues for offshore expansion to bolster their revenue streams and attract investment.
Recently, however, the impetus to seek global opportunities to hedge domestic risks has intensified. In 2023, three leading banks—Fidelity Bank, Zenith Bank, and Access Bank—took decisive steps as part of their expansionary strategies, expected to unlock value in the international market.
Fidelity Bank made waves by acquiring the United Kingdom subsidiary of Union Bank last year, aiming to tap into the UK market while announcing plans for further expansion across Africa. Concurrently, Zenith Bank inked a memorandum of understanding (MoU) with the French government to commence operations in France. Similarly, Access Bank laid out plans to bolster its Asian footprint.
This strategic drive arrives at a pivotal moment. Last year, the Governor of the Central Bank of Nigeria, Yemi Cardoso, hinted at plans for a recapitalization exercise for Nigerian banks, indicating the need to fortify their capacity to support the country's ambition of becoming a $1 trillion economy by 2026. And on Thursday the apex bank announced N500 billion capital base for the top tier banks.
Indeed, the current capital base of N25 billion for tier-1 banks seems inadequate to underpin such lofty economic aspirations, especially amidst recent naira evaluation and economic downturns, which have impacted the valuation of Nigerian banks.
As banks gear up for the impending recapitalization exercise, it's evident that relying solely on the domestic market for revenue growth is no longer tenable. Forward-thinking banks are diversifying their geographic footprint to access new revenue streams and mitigate risks associated with economic volatility or regulatory changes. Even before the rumblings of
recapitalization, leading banks in the country had already recognized the potential of global expansion and strategically positioned themselves for international growth.
For instance, Fidelity Bank's acquisition of Union Bank UK had been in the pipeline long before the recapitalization proposal. Talks began in 2022 and the deal was eventually finalized in 2023. By venturing beyond national borders, these banks seize new growth avenues, diversify their revenue streams, and contribute to Nigeria's economic development.
The commencement of the African Continental Free Trade Area (AfCFTA) agreement in 2021 provided a golden opportunity for Nigerian banks to intensify their expansion across the
continent, leveraging the prospects of free borderless trade among African countries.
Equally noteworthy is the mass migration of Nigerians abroad, creating a viable market for Nigerian banks to tap into the opportunities presented by the growing diaspora, which regularly remits funds or invests in Nigerian assets.
Access Bank already operates subsidiaries in multiple countries, including China, India, Lebanon, and the UK, among others. In 2022, the bank reported significant earnings from its African subsidiaries, indicating a 250% growth over its previous year's revenue. Guaranty Trust Holding Company (GTCO) also boasts a robust presence across Africa and the UK, contributing substantially to its earnings in recent years.
UBA's assets from its African operations exceeded N3.92 trillion in 2022, highlighting its strong growth trajectory across the continent.
Last year marked a pivotal juncture in Nigerian banks' global expansion drive, as they ventured beyond Africa to hedge risks and forge enduring business partnerships. Fidelity Bank, for instance, acquired Union Bank's UK subsidiary and outlined plans for further acquisitions across six African countries.
The CEO of Fidelity Bank, Nneka Onyeali-Ikpe, expressed the strategic imperative to compete favourably with global peers, backed by the bank's impressive financial performance.
Digital innovation plays a pivotal role in Nigerian banks' global expansion strategies. Fidelity Bank, for instance, has been a trailblazer in digital innovation, offering a suite of digital banking solutions to cater to evolving customer needs and position itself as a leading player in the global digital banking landscape.
Navigating complex regulatory landscapes and managing cross-border risks are inevitable challenges for Nigerian banks venturing into international markets. However, their commitment
to upholding high standards of corporate governance and regulatory compliance underscores their resolve to ensure sustainable growth and resilience on the global stage.
By leveraging regional integration, forging strategic partnerships, embracing digital innovation, and ensuring regulatory compliance, Nigerian banks are primed to strengthen their competitive edge, drive sustainable growth, and contribute to Nigeria's economic development, as well as the broader global financial landscape. As they actively position themselves for success in the global market, these banks remain attractive to investors and pivotal players in Nigeria's journey towards a $1 trillion economy.
