Nigerian Banks Tap Pent-up Demand for Retail Services

Ndubuisi Francis in Abuja

While the coronavirus pandemic and fall in the price of oil pushed Nigeria into recession twice in the past six years, the country’s financial services companies have expanded at breakneck speed.

The Financial Times reported that, overall, Africa’s largest economy was home to 20 of the fastest growing companies of any kind in the inaugural FT ranking, compiled with research company Statista.
That puts it second only to South Africa, which has 24 listed.

According to the FT, among these Nigerian companies are specialists in agricultural commodities, construction and food. But it is those offering financial services — from fintech to asset management and insurance — that dominate, making up more than a quarter of the country’s entries.

Head of African banks at rating agency Fitch, Mahin Dissanayake observed that this was because Nigeria’s “awful” economic data does not capture the activity taking place “below the radar”, and the transactions that people are still making.

However, the country’s financial sector has been able to harness technology to turn these people into customers, he says.

“Africa offers a huge unbanked and underbanked market for financial services companies.  
“It offers both incumbent and new entrants opportunities to grow very fast,” Dissanayake said.
Nigeria’s 200 million population has enabled huge growth to be achieved simply by focusing on the local market. Dissanayake says the main shift has been Nigerian banks’ expansion into retail banking.

Previously, they avoided retail customers as creditworthiness could not be established easily. Now, technology has made it easier to track behaviour. So banks are offering more services, such as insurance and remittances.

Data from Enhancing Financial Innovation and Access (EFInA), a research body that monitors financial inclusion in Nigeria, show that 45 per cent of adults used bank services in 2020, up from 38 per cent in 2016.

Some of the growth has been driven by efforts to cater to young people in a country that has a median age of 18, said Tunde Leye, a partner at Lagos-based intelligence consultancy SBM.

“There was a gap in terms of what the formal financial sector provides, and what most of the people that are coming into the working class economy require,” he said. Now, a new generation of fintech entrepreneurs and bank executives wants to create services for its peers.

United Capital, a Lagos lender founded more than 50 years ago, has benefited from targeting retail customers, says Ejikeme Okoli, its head of strategy and innovation.

In 2019, the company — which has subsidiaries offering investment banking, stockbroking and wealth management — set up a consumer finance business to provide microloans.

Okoli says it has over 250,000 customers, with applications processed on an app.
The company has also applied for a digital banking licence to offer services such as payments and deposit taking. In its 2021 annual report, it said: “As part of our evolving corporate strategy, there is an increasing focus on the mass retail and under­served segment of the economy.”

Global Accelerex, ranked 34th in the FT-Statista list, provides electronic payment technology to businesses and government agencies seeking to process transactions. It has expanded by providing new ways of making transactions which Shalewa Alonge, head of brand and partnerships, says have grown in volume by 55 per cent in the past five years.

The company can capture payments through card machines and agency banking, and digitally via QR codes and USSD (a communications protocol for exchanging data).

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