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Banking

Nigeria: Banks rush to close universal banking models

A key part of Nigeria’s strategy to prevent a repeat of the banking crisis is the abolition of universal banking licences.

The new who’s who
Bank Licence Geography
First Holdco International
GTBank Commercial International
UBA Holdco International
Zenith Commercial International
Access Commercial International
Diamond Commercial International
Ecobank Commercial National
FCMB Holdco International
Fidelity Commercial International
Skye Commercial International
Stanbic IBTC Holdco National
Sterling Commercial National
ETB Commercial National
Oceanic Commercial National*
Intercontinental Commercial International
Wema Commercial Regional
Enterprise# Commercial National
Union Holdco* International
Mainstreet# Commercial National
Keystone# Commercial National
Citibank Commercial National
Std Chart Commercial National
Unity Commercial Regional
FinBank Commercial International
* CHD assumption, # Nationalized banks
Source: CHD Research, banks

By May, banks will have had to divest subsidiaries unrelated to commercial banking, or else move to a holding company structure. The aim is to ensure a clearer separation of depositors’ funds from riskier specialist businesses, including investment banking. "There will be a new banking landscape in Nigeria of well-focused and well-capitalized institutions that are better able to manage the risks and contribute to the real economy rather than speculation," says deputy central bank governor Kingsley Moghalu.

Securities and Exchange Commission head Arunma Oteh says these regulatory reforms will help prevent market abuses. Banks, for example, have to divest their shareholder registrar businesses.

Most banks have opted for pure commercial banking licences. Only a minority has gone down the holding-company route, usually because non-commercial banking subsidies are more important for their revenues and profit.

For example, Diamond Bank sold its brokerage, registrar and investment banking subsidiaries to Africa-focused private equity firm Kaizen this summer. Guaranty Trust Bank has applied to divest its insurance business.

The central bank is ending standard N25 billion ($170 million) minimum capital requirements. Banks will now have different capital requirements, according to whether they operate regionally (N10 billion), nationally (N25 billion) or internationally (N50 billion).

This has helped, for example, the recapitalization of Wema Bank, one of the 10 banks the central bank bailed out in 2009. Wema has chosen a regional banking licence, meaning its operations are restricted to between six and 12 contiguous Nigerian states.

New licences, with lower capital requirements, are available, too, for merchant banks and for niche banks – for example, in mortgages. The merchant banking licences mean Nigeria’s boutique investment firms could raise deposits from institutional investors, if they acquire a licence.

Moghalu says he has received licence applications for standalone investment banks, but some in Lagos’ financial community question whether most of the potential applicants would have revenue and deposit-raising capacity sufficient to justify raising the minimum capital (N15 billion) for a merchant-banking licence.




see also:

Nigeria’s new banking landscape emerges

A deal a day

Nigeria must tighten fiscal flows, says CB governor

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