In the wake of the Central Bank of Nigeria’s adoption of a hawkish monetary policy, more local lenders will seek cross-border growth, the CEO of Cowry Asset Management, Johnson Chukwu, has remarked.
Speaking at a virtual webinar themed “Nigeria’s Economic Landscape” organized by Cowry Asset Management, recently, Chukwu explained that the hiking the benchmark interest rate by 6.5 per cent cumulatively, which has driven lending yields up and consequently eaten into banks’ net interest margins, would spur Nigerian banks to move into other African markets.
He stated, “We forecast more Nigerian banks will pursue cross-border growth and gain from risk diversification and better profit prospects for shareholders.”
In his presentation, he indicated that banks were going ahead with restructuring to diversify their income source and stay competitive with other financial services.
According to him, the use of Holdco structures by many local lenders would assist to address the rising competition from fintech by the creation of new fintech products or collaborating and investing in other firms building goods.
“The shift to Holdco arrangements would allow Nigerian banks greater power to diversify their profits in the face of the existing restrictive monetary policy framework, thereby improving their topline. Zenith Bank and Sterling Bank recently gained permission in principle to convert to Holdcos, joining FBN Holdings, Stanbic IBTC Holdings, FCMB Group, and GTCO as NGX-listed banks, which presently run Holdco structures.
“So far, the banking industry posted a favourable year-to-date performance of 8.50 per cent. An example of diversification from Nigerian risks via non-Nigerian businesses may be observed with the United Bank for Africa. 63 per cent of contributions to UBA’s earnings before tax come from African businesses in 21 countries,” he stated.
Chukwu noted that the banking industry has experienced an upswing owing to the rise in transactions electronically and via numerous payment choices.
