Q & A: Rebased and Booming

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After months of delays and mounting anticipation, Nigeria’s economy was officially ‘rebased’ in late March. The announcement that it was now worth $510bn (2013 figures) represented  an 89% increase, far in excess of analysts’ predictions. As a result, Nigeria is now Africa’s largest economy, pushing South Africa to a distant second place, making it a good time to engage Diamond Bank’s Ayona Trimnell on some of the intricacies of the Nigerian banking sector.

Q: How would you describe the Nigerian banking environment?

A: We have a stable financial system, following a number of reforms by the Central Bank in the past decade. This has greatly improved the competitiveness of the industry and further closed the gaps when compared with other banks in Africa, especially in South and North Africa. With tightening monetary policies, Nigerian banks have begun to deepen business strategies while developing niches, particularly in the retail space. Furthermore, balance sheets are healthier, with the nine largest banks having a less than five percent NPL (non-performing loans) ratio in 2013.

The Nigerian banking environment in coming years will be driven largely by retail banking, with product innovation, efficient risk management and customer service taking the centre stage. Likewise, with the sector loan-to-deposit ratios averaging 59%, banks are likely to fund asset growth without necessarily having to look for new sources of financing.

Q: You have a presence in Benin, Ivory Coast, Senegal and Togo. Any plans to take your offering to other African countries?

A: We will continue to evaluate emerging developments, but our international business expansion strategy was to first establish our footprint in Francophone West Africa, and subsequently financial markets in other parts of Africa and Europe. In April last year we established Diamond UK as one of our subsidiaries – with business operations in the heart of London reflecting our drive to expand to the world’s key financial centres.

Q: What are your thoughts on Nigeria’s proposed ‘cashless’ economy?

A: The cashless initiatives expounded by the Central Bank are a welcome development for the country, particularly as a fast-growing and developing economy. The benefits are enormous, as it provides financial institutions with an efficient and cost-effective way of serving customers. The Central Bank’s cashless policy currently under implementation was also aimed at reducing the level of cash used for transactions, to ensure safety, as well as reduce cash management cost for banks and check money laundering, along with generally improving overall efficiency. Furthermore, bank customers are offered various convenient options for carrying out transactions and making payments, from card payments to transfers initiated via mobile devices. As more Nigerians continue to embrace a cashless culture, several e-commerce platforms have emerged, increasing buyer-seller interactions in both real and virtual markets. This bodes well for domestic as well as international trade, providing potential for faster economic growth in coming years.

Q: Do you think your country suffers unfairly from the stereotype that it is unsafe to engage in card transactions in Nigeria?

A: Yes. The country has gone through a lot of reforms in the last 10 years and a lot of things have really changed for the better. To minimize incidences of card fraud in the Nigerian Payments System for instance, all Nigerian banks migrated all cards in 2010 from magnetic strip technology to Chip+PIN. Consequently, card-related fraud has dropped by up to 96% since the advent of EMV (Europay, MasterCard & Visa) cards. Other card-related fraud prevention strategies implemented in the banking industry include the introduction of second level authentication for card payments, online real-time monitoring tools for PIN entry attempts, automatic blocking of card after three unsuccessful PIN attempts etc. Just recently, banks have been mandated to introduce anti-skimming devices on all ATM machines before the end of June. With over 300 e-commerce companies now operating in the country, I can say that confidence in e-payment solutions is gradually strengthening.

Q. Are you seeing more international interest in the Nigerian banking sector, or is your business focused on Africa?

A: The Nigerian banking sector is largely dominated by banks with international footprints, either operating as Nigerian banks with international licenses or as foreign banks with Nigerian subsidiaries. More than half of deposit money banks in the country currently operate business locations outside Nigeria. With growing investor confidence, Nigeria has been able to entice many foreign banks, who have certainly taken the country up on its offer of future prosperity and profitability, just as Nigerian banks now have the strength to expand internationally. Successful foreign banks like Citibank, Stanbic and Ecobank have shown that Nigeria is a viable place to invest, as top local banks including Diamond Bank are proving that Nigerian financial institutions have become credible and successful abroad, with footprints in Africa and Europe. 

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