South African Bank Set to Rival Access, UBA, Zenith other Banks in Nigeria
- Absa Group is exploring plans to convert its Nigerian representative office into a merchant bank
- The move is part of a broader strategy to cut reliance on South Africa, Kenya and Ghana, which generated over 80% of first-half profits
- Absa also raised its stake in its Kenyan business to 72% as the lender pushes to spread earnings across more African markets
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Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
South African lender Absa Group is considering upgrading its Nigerian representative office to a full merchant banking operation, a step that would give the bank direct access to Africa's largest economy.
Absa Group Chief Executive Officer Kenny Fihla disclosed the plans during an interview with Bloomberg TV, saying the bank was actively "exploring the possibilities of converting into a merchant banking licence" for its Nigerian office.
Source: Getty Images
Absa's Case for Diversifying
The push into Nigeria is driven by Absa's need to spread its earnings more evenly. South Africa, Kenya and Ghana together generated more than 80% of the group's profit in the first six months of the year, leaving the bank exposed whenever economic conditions turn rough in any of those three markets.
Fihla was direct about the risk that concentration creates.
He said:
"The dependence on two or three big markets is fine if you've got tailwinds, but as soon as you experience some headwinds, you are vulnerable to massive shocks."
He added that the bank's primary goal is to "diversify our revenue streams, both in terms of geographies, in terms of business lines, but also in terms of client segments.
A merchant banking licence in Nigeria would allow Absa to take corporate deposits and offer lending, investment banking and project finance services to clients in the country.
Competition Absa Would Face in Nigeria
Entering Nigeria at a fuller capacity would put Absa up against well-established rivals.
Fellow South African financial institutions Standard Bank Group and FirstRand already operate there, as do major Nigerian lenders including Access Holdings, Zenith Bank and First Bank of Nigeria.
Nigeria has grown more attractive to foreign financial institutions as President Bola Tinubu's government pursues investment-friendly policies aimed at supporting economic growth.
Source: Getty Images
Separately, Absa confirmed it has increased its ownership in its Kenyan subsidiary to 72%, falling short of an earlier target of 85%.
Charles Russon, Absa's group executive for Africa regions, said the bank still wants to push that figure higher when the right opportunity arises.
Russon said:
"Over the next couple of years, when the time is right, we will try to increase further. "Ideally, we would like to have as big a position as possible."
Together, the Nigeria and Kenya developments signal Absa's commitment to building a broader African presence while reducing the outsized influence that a handful of its existing markets currently have on overall group performance.
List of 10 common bank charges
Earlier, Legit.ng the House of Representatives has initiated plans to investigate charges of commercial banks on customers' accounts and plans to summon the CBN and major commercial banks to appear before the committee on banking regulations.
The motion, titled “Need to Curb Arbitrary Bank Charges and Protect Nigerian Customers,” stated that the deductions from customers' accounts by banks operating in Nigeria are arbitrary, excessive, and unexplained.
N50 is charged on electronic transfer of money deposited in any bank or financial institution, on any account, on sum of N10,000.00 or more.
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