Business News
Investors Express Mix Reactions on Nigeria’s Banks
From Joy Okeke, Abuja
Foreign investors are skeptical about investing in Nigerian banks, with some expressing concerns that strong results the six biggest banks are reeling out, mask the true state of finances in spite of oil hedges
Returns at Nigeria’s top banks are running at levels that their European counterparts can only dream of, and the country’s biggest lenders are eyeing up an opportunity from the 60 million citizens without bank accounts.
But according to Ronak Gadhia, an analyst for investment bank EFG-Hermes, the pool of investors who want to own Nigerian lenders is shrinking.
“There used to be quite a few supporters,” he told the Financial Times. “Now, it’s very hard to get a client to pick up when you are calling to discuss Nigerian banks.”Some investors are averse because of wider conditions in Nigeria. The country’s currency value is volatile, with a central bank that props up the naira, before sudden devaluations, as happened in March and July. Nigeria has currency controls, adding to investors’ concerns about unpredictability and getting their cash out.
When it comes to banks, the main source of investors’ caution, says Mr Gahia, is a belief that the average 19.5 per cent return on equity enjoyed by the big-six Nigerian banks in the first half of the year masks the true state of their finances and outlook.
The “cost of risk” for the six, which measures their credit charges flowing through banks’ income statements as a percentage of their total loans, was just 1.6 per cent for the first half of 2020, far lower than the 5.3 per cent EFG analysts predicted for the full year. The low charges were at odds with the Covid-19 pandemic, which locked down Nigeria’s biggest states at the end of March and ended international and domestic flights, driving the country into its worst recession in more than a decade.
Nigeria, where the oil sector accounts for about nine per cent of economic output, but about three-quarters of export revenues and nearly all foreign exchange, also had to deal with record low oil prices, caused by both the pandemic and an oil price war between Saudi Arabia and Russia.
There is an opportunity for banks to grow their business by tapping the population of adults in Nigeria without bank accounts
“2020 has been a very challenging and I guess I should say unprecedented year as we continue to deal with the health, financial and economic impacts of the Covid-19 pandemic,” UK Eke, then group managing director at First Bank of Nigeria, told investors on an analyst call on August 3, describing the “monumental contraction” in economies across the world.
Still, the bank, which is the country’s third-largest lender by assets, grew pre-tax profits by 56 per cent in the first half of the year, as a modest increase in loan losses was more than outstripped by a surge in interest revenues, largely from treasury activities, which benefited from volatile markets.
Other Nigerian banks reported a similar trend. Rating agency Fitch warned in April that Nigerian banks were at “severe risk” from the oil price slump and the pandemic. Mr Ghadia says banks’ “significant exposure” to the oil and gas sector was so far proving “more resilient than most other parts of the (loan) book”.
After that crash, he says banks insisted upstream borrowers, a category that includes the companies who search and drill for oil, had hedges in place to protect them from falling oil prices.
The hedges, which take the form of derivatives contracts and allow the companies to lock in a guaranteed oil price by paying a fee, now reduce the chance of banks having to take provisions for losses on those loans.
Still, Taiye Ayandibu, head of investor relations at Nigeria’s largest lender Zenith Bank, said his institution was “concerned” about oil and gas loans even though 90 per cent of their upstream borrowers have hedges in place.
“Most of the hedges will mature towards the end of this year into early next year and if prices remain depressed, it will become more expensive to buy new hedges,” he said.
Mr Ayandibu is more optimistic about his bank’s overall loan book, particularly the loans which have been restructured through the pandemic. In March, the central bank gave lenders permission to offer temporary easings to borrowers affected, without forcing them to take provisions or classifying the loans as non-performing.
“Most of the restructurings were done due temporary cash flow issues while the assets are still good and producing,” Mr Ayandibu says, adding that he did not expect them to become non-performing. Data from Nigeria’s central bank show 41 per cent of loans were classed as restructured by June 20.
This month, rating agencies turned more positive on the sector. Fitch has recently taken a clutch of Nigerian banks, including Guaranty Trust Bank, Zenith and United Bank of Nigeria, off its watch list for a possible downgrade. In its note on Guaranty, Fitch said pressures on the bank’s loan books had “significantly eased” since March when it was put on ratings watch negative. The improvement stemmed from developments around restructured loans and because of the banks “own debt relief measures”, Fitch says.
In the long term, Mr Ayandibu says there is a “massive” opportunity for his bank and others to grow their business by tapping the population of adults in Nigeria without bank accounts.
“In the last few years, we have grown our customer base astronomically through our retail drive; from 7.8m in December 2018 to 11m in June 2020,” he says.
By Tony Obiechina, Abuja
The Budget Office of the Federation has reaffirmed the integrity of Nigeria’s newly enacted Tax Reform Acts, cautioning against what it described as governance by speculation and unverified claims following allegations of post-passage alterations.
In a statement on Wednesday, the Budget Office said it had taken note of concerns raised by the Minority Caucus of the House of Representatives, stressing that the sanctity of the law is central to constitutional democracy and not a mere procedural formality.
According to the Office, any suggestion that a law could be altered after debate, passage, authentication, and presidential assent without due process would strike at the core of the Republic and undermine citizens’ right to be governed by transparent and stable laws.
However, it warned that democratic integrity is also endangered by the careless amplification of unverified claims. “A nation cannot be governed by insinuation or sustained on circulating documents of uncertain origin,” the statement noted, adding that public confidence, once shaken by speculation, is often difficult to restore.
The Budget Office emphasized that both government and citizens share a common interest in truth, clarity, and due process, noting that public finance depends heavily on trust in the legality and clarity of fiscal laws. It welcomed the decision of the National Assembly to investigate the allegations, describing institutional inquiry, not conjecture as the appropriate response to claims of illegality.
On public access to the law, the Office agreed that Nigerians and the business community are entitled to clear and authoritative texts of all laws they are required to obey. It clarified, however, that the authenticity of legislation is determined by certified legislative records and official publication processes, not by informal or viral reproductions.
The statement also underscored the importance of separation of powers, warning that claims suggesting Nigeria is being governed by “fake laws,” if not backed by established facts, risk eroding confidence in democratic institutions.
At the same time, it stressed that legislative scrutiny should not be dismissed by the executive, noting that oversight is a constitutional duty, not an act of hostility.
From a fiscal perspective, the Budget Office said legal certainty is essential for revenue projections, macroeconomic stability, budget credibility, and investor confidence. While it is not the custodian of legislative records, it maintained that uncertainty around operative tax provisions directly affects economic planning.
To restore confidence, the Office proposed a set of measures, including the publication of verified reference texts in a single public repository, orderly access to Certified True Copies for stakeholders, clear public explanations where discrepancies are alleged, and strict alignment of all implementing regulations with authenticated legal texts.
Addressing calls for suspension of the tax reforms, the Budget Office cautioned against allowing prudence to slide into paralysis. It argued that properly implemented tax reform is necessary to reduce dependence on borrowing and inflationary financing, while easing indirect burdens on vulnerable citizens.
“Where clarification is required, it must be provided; where correction is required, it must be effected; where investigation is required, it must proceed,” the statement said, adding that governance and reform should not be stalled by unresolved conjecture.
The Office concluded by describing taxation as a democratic covenant that binds citizens and the state, insisting that compliance depends on transparency and trust. It called on political actors to protect institutions as much as positions, urging citizens and businesses to rely on verified sources and resist the spread of unauthenticated information.
The statement was signed by Tanimu Yakubu, Director-General of the Budget Office of the Federation, who reaffirmed the agency’s commitment to fiscal transparency, institutional integrity, and reforms that advance national prosperity while safeguarding citizens’ rights.
By Jennifer Enuma, Abuja
President Bola Tinubu has congratulated Alhaji Aliko Dangote, the President of Dangote Group, on his appointment to the World Bank’s Private Sector Investment Lab, a body tasked with promoting investment and job creation in emerging economies.
In a statement by Special Adviser on Media and Publicity, Bayo Onanauga, the President described the appointment as apt, given Dangote’s rich private sector experience, strategic investments, and many employment opportunities created through his Dangote Group.
The Dangote Group became one of Africa’s leading conglomerates through innovation and continuous investment.
Dangote Group’s business interests span cement, fertiliser, salt, sugar, oil, and gas. However, the $20 billion Dangote Petroleum Refinery and Petrochemicals remains Africa’s most daring project and most significant single private investment.
“President Tinubu urges Dangote to bring to bear on the World Bank appointment his transformative ideas and initiatives to impact the emerging markets across the world fully” the statement said.
The World Bank announced Dangote’s appointment on Wednesday, as part of a broader expansion of its Private Sector Investment Lab. The lab now enters a new phase aimed at scaling up solutions to attract private capital and create jobs in the developing world.
The CEO of Bayer AG, Bill Anderson, the Chair of Bharti Enterprises, Sunil Bharti Mittal, and the President and CEO of Hyatt Hotels Corporation, Mark Hoplamazian, are on the Private Sector Investment Lab with Dangote.
The World Bank said the expanded membership brings together business leaders with proven track records in generating employment in developing economies, supporting the Bank’s focus on job creation as a central pillar of global development.
By Joel Oladele, Abuja
The Nigeria Customs Service (NSC) has generated an impressive N1,751,502,252,298.05 in revenue during the first quarter of 2025.
The Comptroller-General (CG) of the Service, Bashir Adeniyi, disclosed this yesterday, during a press briefing in Abuja.
According to Adeniyi, the achievement not only surpasses the quarterly target but also marks a substantial increase compared to the same period last year, reflecting the effectiveness of recent reforms and the dedication of customs officers across the nation.
“This first quarter of 2025 has seen our officers working tirelessly at borders and ports across the nation.
I’m proud to report we’ve made real progress on multiple fronts—from increasing revenue collections to intercepting dangerous shipments,” Adeniyi stated.He attributed this success to the reforms initiated under President Bola Tinubu’s administration and the guidance of the Honourable Minister of Finance and Coordinating Minister of the Economy, Olawale Edun.
The CG noted that the revenue collection for Q1 2025 exceeded the quarterly benchmark of N1,645,000,000,000.00 by N106.5 billion, achieving 106.47% of the target. This performance represents a remarkable 29.96% increase compared to the N1,347,705,251,658.31 collected in Q1 2024.
Adeniyi highlighted the month-by-month growth, noting that January’s collection of N647,880,245,243.67 surpassed its target by 18.12%, while February and March also showed positive trends.
“I’m pleased to report the Service’s revenue collection for Q1 2025 totaled N1,751,502,252,298.05.
“Against our annual target of N6,580,000,000,000.00, the first quarter’s proportional benchmark stood at N1,645,000,000,000.00. I’m proud to announce we’ve exceeded this target by N106.5 billion, achieving 106.47% of our quarterly projection. This outstanding performance represents a substantial 29.96% increase compared to the same period in 2024, where we collected N1,347,705,251,658.31.
“Our month-by-month analysis reveals even more encouraging details of this growth trajectory,” Adeniyi said.
In addition to revenue collection, Adeniyi said the NCS maintained robust anti-smuggling operations, recording 298 seizures with a total Duty Paid Value (DPV) of ₦7,698,557,347.67.
He stated that rice was the most seized commodity, with 135,474 bags intercepted, followed by petroleum products and narcotics.
“From rice to wildlife, these seizures show our targeted approach,” Adeniyi remarked, noting the NCS’s commitment to combating smuggling and protecting national revenue.
Adeniyi also highlighted key initiatives, including the expansion of the B’Odogwu customs clearance platform and the launch of the Authorized Economic Operators Programme, which aims to streamline processes for compliant businesses. The NCS’s Corporate Social Responsibility Programme, “Customs Cares,” was also launched, focusing on education, health, and environmental sustainability.
Despite these achievements, the CG noted that the NCS faced challenges, including exchange rate volatility and non-compliance issues. Adeniyi acknowledged the need for ongoing adaptation and collaboration with stakeholders to address these challenges effectively.
Looking ahead, the NCS aims to continue its modernization efforts and enhance service delivery, ensuring that it remains a critical institution in Nigeria’s economic and security landscape.
“Results speak louder than plans; faster clearances through B’Odogwu, trusted traders in the AEO program, and measurable food price relief from our exemptions. We’ll keep scaling what works,” he concluded.
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