The capital inflow to the financial sector in 2020 Full Year was largely dominated by foreign-owned banks, with Nigerian-owned banks playing second fiddle in the quest to secure external investment from foreign investors.
Capital inflow obtained in 2019/2020
It was gathered that capital importation into the financial sector declined by 60% to $9.68 billion in 2020 when compared to the $23.98 billion recorded during the corresponding period of 2019. The amount for 2020 was accounted for by 26 banks in Nigeria.
The foreign-owned banks accounted for 73% of the capital inflow, receiving $7.04 billion out of the $9.68 billion grossed last year. The foreign-owned banks also dominated the capital inflow in 2019, securing 69% of the inflow, which was estimated at $16.66 billion out of the $23.98 billion of 2019.
Why the fall in capital inflow?
In 2020, COVID-19 caused uncertainty among foreign investors over fear of the pandemic impact on Nigeria’s financial market and how long the lockdown measures as well as the impact will last.
COVID-19 compelled investors to hold their cash and wait out the first wave of the pandemic, as they patiently waited to see how the government will respond to the pandemic. The bank was considered as essential during the lockdown period, so the lenders were allowed to open, but not to full capacity.
Foreign investors confidence dropped, reason why the capital inflow began to drop after Q1 2020. According to analysis of data obtained from Nigerian Bureau of Statistics (NBS) by Ripples Nigeria, $5,85 billion was imported in Q1 2020, but the amount dropped to $1.29 billion in Q2, before rising slightly in Q3 to $1,46 billion, but later plunged to $1.06 billion in the fourth quarter.
Top five banks with highest capital inflow 2020
Standard Chartered Bank (SCB), Stanbic IBTC, Citibank and Rand Merchant Bank, received the highest capital inflow into the country in 2020. According to figures obtained from NBS, Standard Chartered Bank received $2.54 billion to top the list in 2020. SCB was followed by Stanbic IBTC which obtained $2.17 billion of capital inflow.
Citibank got $1.51 billion, First Bank attracted $938.60 million, while Rand Merchant Bank accounted for $822 million, to complete the domination of foreign-owned banks in Nigeria’s external investment inflow for the financial market.
Top five banks with highest capital inflow 2019
In 2019, Ripples Nigeria learnt that foreign-owned bank also reigned supreme with capital inflow, with Stanbic IBTC accounting for $8.63 billion of the inflow, Rand Merchant Bank was next with $2.93 billion, SCB got $2.82 billion and Citibank obtained $2.28 billion from foreign investors, while Access Bank obtained $1.80 billion during the same period.
What foreign-owned bank domination means
Despite having a more robust market valuation, Nigerian-owned banks are not appealing to foreign investors compared to their foreign-owned counterparts, this is why capital inflow into the financial sector wasn’t tailored towards them.
This proves that external investors have more faith in the operation of foreign-owned banks, and market size is not considered or an influence in the investment decisions of foreign investors.
The market size; number of customers, markets and revenue have failed to increase the value of the likes of GTbank, Zenith Bank and UBA in the eyes of foreign investors.
These are some of the largest banks in Nigeria with subsidiaries across Africa and Europe, but yet they pull less weight compared to Citibank, Rand Merchant Bank and the other foreign-owned banks in the country.
Nigerian-owned banks will have to work on their image in the financial market in order not to remain stereotyped as a local bank among the foreign investors’ community.
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