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Nigerian banks better prepared for expansion –Moody’s

Moody's explains why Nigeria's credit rating is exposed to shocks

Nigerian banks foraying into new markets across Africa or branching out into other financial services will be more protected from headwinds than they were in the heat of the 2007-2008 global financial meltdown, ratings agency Moody’s has said.

Bloomberg reported on Wednesday that heavyweight lenders like Guaranty Trust Bank (GTB) and Access Bank are towing the path of FBN Holdings and Stanbic IBTC Bank to adopt a holdco structure that will offer their domestic banking assets substantial protection against other businesses.

While Access Bank has the aspiration to launch a payments operation and broaden its presence on the continent, GTB wants to set up asset management units.

In 2010 following the global debt crisis, the Central Bank of Nigeria revised regulations and the mismanagement of client funds threw the sector close to the point of crashing.

Read also: Nigeria requires $3tn investment on infrastructure to catch up with peers – Moody’s

“Regulation this time will be tighter and regulators will ringfence local depositors and senior creditors,” Moody’s said.

“In 2008 and 2009, Nigerian banks funded their non-banking activities using the deposits originated in their Nigerian operations.”

Ideally, Nigerian commercial banks undertake expansion into West Africa and Central Africa before venturing into Eat Africa.

“Some of the neighbouring countries have weaker operating conditions and regulations and therefore present risks.”

“However, due to the general low penetration and growing per-capita income, they also present long-term opportunities,” Moody’s added.

The New-York based firm foresaw that diversification would bring resilience to income generation and the quality of bank assets, noting that lenders in the country encountering hurdles in pursuing revenue growth on account of harsh operating ambience.

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