Banking
Unity Bank, Wema Bank, Others “Potentially Challenged”—Report
By Modupe Gbadeyanka
All seems not to be too well with second tier banks in Nigeria, including Unity Bank, which has reportedly been in talks with investors since October.
According to a report by Bloomberg, analysts at Exotix Partners LLP, Jumai Mohammed and Ronak Gadhia said in a note last month that, “We view the Tier 2 banks as potentially challenged” because they seem unable “to weather asset-quality deterioration storms.”
Bloomberg said in its report published today titled ‘Nigeria Bank Divide Widens as Cash Shortage Chokes Small Lenders’ that small-and-medium sized lenders like Wema Bank Plc dropped plans last month to raise Dollar loans to rather sell Naira debt locally in smaller tranches.
Unity Bank Plc, which missed a February 28 central bank deadline to recapitalize, has been in talks with investors since October, while Diamond Bank Plc started negotiations to sell businesses and issue debt over a year ago.
The report quoted an analyst at Afrinvest West Africa Ltd, Omotola Abimbola, as saying “The gap between the Tier 1 and Tier 2 banks has been widening in profitability and balance-sheet size,” expressing fears that, “In the next one or two years, we will probably see the trend extending further.”
Below is Bloomberg’s report:
The divide between the haves and the have-nots among Nigerian banks is widening.
The country’s biggest lender is so flush with cash it plans to repay $400 million of bonds when they become due in November 2018 rather than raising additional debt, while the next two largest banks sold international bonds for the first time since 2014.
At the other end of the scale, smaller lenders are scrapping plans to raise dollar loans and struggling to find investors to raise capital.
Top tier banks in Africa’s most-populous nation and biggest oil producer are rallying after the central bank in April opened a foreign-exchange trading window, easing a crippling currency shortage that contributed to the worst economic contraction in 25 years.
Smaller banks are lagging behind as they battle rising levels of non-performing loans and capital buffers near regulatory minimums.
“The gap between the Tier 1 and Tier 2 banks has been widening in profitability and balance-sheet size,” said Omotola Abimbola, an analyst at Afrinvest West Africa Ltd. “In the next one or two years we will probably see the trend extending further.”
United Bank for Africa Plc, the third-biggest lender by market value, raised $500 million in its first Eurobond sale on June 1 at yields below initial guidance.
This followed an equivalent issue a week earlier by Zenith Bank Plc in a deal that was four times oversubscribed. Guaranty Trust Bank Plc, Nigeria’s largest lender, said this month it has no plans to sell Eurobonds because it’s setting aside funds to repay existing debt.
‘Potentially Challenged’
By contrast, small- and-medium sized lenders like Wema Bank Plc dropped plans last month to raise dollar loans to rather sell naira debt locally in smaller tranches. Unity Bank Plc, which missed a Feb. 28 central bank deadline to recapitalize, has been in talks with investors since October, while Diamond Bank Plc started negotiations to sell businesses and issue debt over a year ago.
“We view the Tier 2 banks as potentially challenged,” Exotix Partners LLP analysts Jumai Mohammed and Ronak Gadhia said in a note last month. The lenders seem unable “to weather asset-quality deterioration storms.”
Still, the five-year dollar bonds didn’t come cheap. Lagos-based United Bank for Africa settled on a coupon, or interest paid twice annually, of 7.75 percent. That’s the highest of at least 10 sales of $500 million by emerging-market banks this year from Turkey, Kuwait, Bahrain, South Korea and China. Zenith will pay 7.375 percent on the securities it placed, compared with 6.25 percent on five-year notes sold in April 2014.
Even so, more lenders will issue Eurobonds because they need dollars to offer loans in the U.S. currency or to repay debt, said Lekan Olabode, an analyst at Vetiva Capital Management Ltd. in Lagos. Lome, Togo-based Ecobank Transnational Inc. plans to sell a $400 million, 5-year convertible bond this month, which will be used to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit, its biggest business.
Margin Impact
Access Bank Plc has $350 million of bonds due in July, while Fidelity Bank Plc has to repay $300 million next May. “Any Eurobond issuance from the Tier 2 names will come in relatively more expensive — impacting margins,” Olabode said.
Some banks may use share-price gains to sell equity, although most trade at less than book value, making a rights offering expensive, he said. Local debt also comes at a price, with yields on 5-year government bonds at 16.3 percent.
The Nigerian Stock Exchange Banking Index has advanced 44 percent this year, with United Bank for Africa soaring 99 percent to its highest since January 2014, while Access Bank has climbed 83 percent to a four-year high. Wema has gained less than 2 percent and Skye Bank Plc and Union Bank of Nigeria Plc are up about 10 percent in 2017.
Union Bank, in which former Barclays Plc Chief Executive Officer Bob Diamond’s Atlas Mara Ltd. owns 31 percent, said in November it will sell as much as 50 billion naira ($156 million) in a rights issue. The sale is still scheduled to happen by the end of this quarter, spokeswoman Ogochukwu Ekezie-Ekaidem said on June 8.
Sterling Bank, which announced plans to raise 65 billion naira in Tier 2 capital last July, managed to raise 7.9 billion naira in 2016 at 16.5 percent, according to Chief Financial Officer Abubakar Suleiman. “We don’t think the market conditions are OK to raise it now, so we are waiting,’’ he said.
Without enough capital to back new business and write loans, small lenders risk falling further behind as Nigeria’s economy recovers from last year’s 1.6 percent contraction. The International Monetary Fund forecasts Nigeria will expand 0.8 percent this year as the oil price improves.
“Big banks have a pricing advantage,” said Olabode. “That makes a big difference in size and capacity to do business.”
Additional Information from Bloomberg
By Modupe Gbadeyanka
A platform to enable cross-border intra-Africa payments for individuals, merchants, and traders in Nigeria and Ghana is being designed by Onafriq Nigeria Payments Limited in partnership with the Pan-African Payment and Settlement System (PAPSS).
The platform, currently in its pilot stage, is the first wallet-based outbound payments scheme, which is fully in Naira and instant, without relying on hard currency conversion.
The parties are working together with banks and mobile money operators in the West Africa nations.
The Central Bank of Nigeria (CBN) has already approved this initiative, which will benefit small and medium enterprises (SMEs), the real engine of intra-African trade, as they will now have access to a faster, cheaper way to reach customers and suppliers across the border.
By reducing barriers to cross-border trade, the new service will allow these businesses to grow their addressable markets and activity. From December 1, this service will be fully operational for a 6-month period.
Through the partnership with PAPSS, Onafriq, which is a CBN licensed payment service provider, is supporting the operationalization of the Africa Continental Free Trade Area (AfCFTA) mandate. The mandate itself is driving tariff-free trade for the 54 member states of AfCFTA. Within the partnership itself, Onafriq provides the mobile money rails, with an ecosystem consisting of over 1 billion mobile wallets.
Meanwhile, PAPSS brings a network of over 160 commercial banks, representing an ecosystem of more than 400 million bank accounts across its 19 African countries of operation. The two partners are essentially seamlessly connecting two worlds: mobile money and banking. As a consequence, intra-African trade transactions will take place more easily and opportunities will be created.
Currently, Africa is made up of bank and mobile-led markets, with siloes often inhibiting transactions between these economies. However, this partnership will remove these boundaries. With over one billion mobile wallets and 500 million bank wallets across Africa, this partnership will allow for cross-border collaboration at scale.
This partnership builds on Onafriq and PAPSS’ existing partnership for payments into Ghana, announced earlier this year.
“Our work with PAPSS shows what collaboration at scale can unlock—seamless, secure connections between banking systems and mobile money ecosystems. This is how we open bi-directional trade corridors, reduce costs for businesses, and give African enterprises the rails they need to trade with confidence in their own currencies. The vision is continental, but it starts with practical steps like this one,” the Managing Director for Anglophone West Africa, Mxolisi Msutwana, said.
The Chief Information Officer for PAPSS, Ositadimma Ugwu, added, “Too often, African businesses and individuals see borders as roadblocks instead of opportunities. With this step, we’re challenging that mindset, giving Nigerians the ability to send value next door with the same ease as sending a text message. Our vision is simple: make Africa’s borders invisible to payments. This pilot makes that a reality, moving us closer to a continent where payments don’t pause at the border.”
By Adedapo Adesanya
Mrs Ifeyinwa Osime has been appointed as the chairman of the board of Access Bank Plc, following the retirement of Mr Paul Usoro on January 29, according to a statement to the Nigerian Exchange (NGX) Limited.
Mrs Osime, an accomplished legal practitioner, joined Access Bank’s board in November 2019 as an independent non-executive director and had chaired the Board Human Resources and Sustainability Committee and the Governance, Nomination, and Remuneration Committee.
This role made her contribute significantly to bank’s corporate governance, leadership development, and sustainability initiatives.
In addition to her role at Access Bank, Mrs Osime is a Director at Ebudo Trust Limited and a Partner at McPherson Legal Practitioners, where she advises on corporate and commercial matters and contributes to strategic leadership.
She is also a member of the Nigerian Bar Association, Women Corporate Directors, Nigeria Chapter, and Chartered Institute of Directors Nigeria, where she serves on the Executive Committee of the Women Sectorial Group.
Beyond her professional responsibilities, Mrs Osime is committed to mentoring youths and is actively involved in the Autism and Developmental Delays Support Community, reflecting her dedication to inclusion and social impact.
Speaking on her appointment, the chairman of Access Holdings, Mr Aigboje Aig-lmoukhuede, said: “Mrs Osime is a principled and experienced leader with a deep understanding of the Bank’s strategy and values.
“She has demonstrated strong commitment to the Bank’s vision and mission, and I am confident that, under her leadership, the Bank will continue to advance its strategic objectives of delivering sustainable value to shareholders and other stakeholders in the pursuit of its vision to become the world’s most respected African Bank.”
He also congratulated Mr Usoro on the completion of his tenure and for his exemplary leadership, dedication and significant contribution to the Group, saying he remains a valued member of the Access Bank family.
By Adedapo Adesanya
The African Energy Bank (AEB), a pan-African financial institution established to mobilise capital for the continent’s energy development and strengthen regional energy value chains, will begin operations in June 2026.
This came as Nigeria officially handed over the headquarters of bank at a ceremony held on the sidelines of the ongoing Nigeria International Energy Summit (NIES).
The president of the African Petroleum Producers’ Organisation (APPO) and Côte d’Ivoire’s Minister of Mines, Petroleum and Energy, Mr Mamadou Colibaly, praised Nigeria for its leadership in bringing the initiative to fruition, as he disclosed the bank was expected to commence operations in four months’ time.
“We are committed to launching this bank no later than June. I sincerely thank our partners for providing the headquarters and office that make this take-off possible. The African Energy Bank represents Africa’s commitment to finance, develop, and secure its own energy future by Africans, for Africans,” he said.
The African Energy Bank is a joint initiative of APPO member states and the African Export-Import Bank (Afreximbank), established to mobilise domestic and regional capital for Africa’s energy infrastructure, reduce dependence on external financing, and align energy investments with the continent’s long-term development and industrialisation agenda.
While performing the handover, Nigeria’s Minister of State for Petroleum Resources (Oil), Mr Heineken Lokpobiri, said the country had fulfilled all its responsibilities as host nation.
“Nigeria has met every obligation as host. The headquarters is ready, strategically located, and fully equipped, and we are prepared for immediate take-off.”
The ceremony highlighted a growing consensus among African leaders on the need for the continent to take greater ownership of its vast natural resources.
Through tailored financial instruments, the bank is expected to support projects across the energy value chain, including exploration, refining, renewable energy integration, and local content development, with a focus on job creation and economic value addition.
The African Energy Bank has been touted as not just another financial institution, but a strategic pillar in Africa’s quest for economic independence and long-term energy security
The African Energy Bank is a pan-African financial institution jointly promoted by APPO member states and Afreximbank to provide tailored financing solutions for energy projects across the continent, strengthen regional energy markets, and support sustainable development through improved access to capital.
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