Tough nut to crack: Why it's tough going for Nigerian lenders in Kenyan market


GT Bank along Kimathi Street. [Jonah Onyango, Standard]

At their home in Africa’s biggest economy and most populous nation, Nigeria, they are banking giants with commanding market lead and trillions of shillings in worth of assets.

But here in Kenya, East Africa’s largest economy, the famed Nigerian banking giants trail the market with a poor run of yearly losses or modest profits compared to the billions earned by their peers. What could be ailing Nigerian lenders in Kenya? 

Nigeria’s banking giants are struggling to gain a foothold in Kenya’s evolving market despite their ambitious expansion plans. 

The Kenyan units of Nigeria’s largest lenders as ranked by assets, Access Bank, and United Bank for Africa (UBA) posted a mixed performance according to their just published annual results underlining their difficulty. 

There are three Nigerian-domiciled financiers currently operating in Kenya. The other one is GTBank. 

The Kenya unit of Access Bank, which operates across 15 countries, mostly in Africa but including Britain and France, recorded a profit after tax of Sh508.2 million in the year ended December 2023 growing from Sh233 million a year earlier. 

On the other hand, UBA Kenya remained in the red after posting a loss of Sh344.1 million in the year ended December 2023. The loss was, however, narrower than the loss of Sh436.5 million posted a year earlier. 

UBA, a prominent Nigerian bank with over 1,000 branches, operates 20 subsidiaries throughout Africa, including countries like Ghana and Ivory Coast in the west, Kenya and Uganda in the east, and Mozambique and Zambia in the south. 

Additionally, UBA maintains representative offices in London, Paris, and New York. 

The modest performance of the Nigerian lenders has come as their local leading rivals report billions in earnings. 

Equity Group, Kenya’s biggest bank by customers, for instance, said its net profit for the year ended December 2023 fell by Sh2.91 billion or 6.5 per cent to Sh41.98 billion after the lender doubled its provisioning for bad loans in the period. 

Co-operative Bank of Kenya’s (Co-op Bank) new earnings grew by five per cent to Sh23.2 billion, driven by income growth. 

Experts say a couple of factors could be contributing to the poor show by the Nigerian lenders compared to their indigenous rivals. 

Some experts have mentioned the possibility that Nigerian banks haven’t adapted their strategies to the specific Kenyan market and customer base.

They have also cited potential regulatory hurdles Nigerian banks might face in Kenya compared to their home market. At the same time, Nigerian foreign lenders face dominant local players. 

Cultural Considerations could also come into play, with the possibility of cultural differences in banking practices or customer preferences hindering Nigerian banks’ success. 

“It is an expansion fueled by an aggressive pan-African agenda but often in full contempt of local market terrain,” wrote former financial analyst and newspaper columnist George Bodo in a past article. He is now deceased. 

“Which is why despite over 10 years of operations in the region, and in the majority of the cases, entering the markets through brownfield operations, they are yet to rise to dominant tiers they hold in their home markets.” 

Bodo continued: “This boils down to two fundamental (and ruinous) differences between their home (Nigerian) market and the East African markets. First, Nigeria is largely a big-ticket market. For quite some time, low-risk appetite for retail lending has pushed Nigerian banks to focus on what they consider reliable borrowers, which are often large private conglomerates or entities/businesses in which the State holds an interest(s).” 

Despite the poor run, the Nigerian lenders are keen to take on their local dominant rivals. 

For instance, in a bid to change its fortunes, UBA Kenya early this year appointed Mary Mulili as its new Chief Executive. 

The Nigerian lender is banking on Ms Mulili, a Kenyan, to turn around its fortunes after a poor run. 

Ms Mulili, who is a UBA insider, previously worked as the company’s executive director, as general manager at Bank of Africa, and as Head of Corporate Banking at GTBank Kenya. 

Ms Mulili, while acknowledging her appointment said plans to build and deepen the lender’s income streams by leveraging the bank’s tentacles across Africa. 

“Building on UBA Group’s extensive network, we are committed to leveraging our presence across 20 African countries and globally in Dubai, the UK, the US and France to provide bespoke financial solutions for our customers,” she said. 

UBA earlier last year doubled down on plans to expand its lending operations in Kenya, the largest economy in East Africa. 

This decision came after UBA received a trade finance facility worth $150 million (Sh22.6 billion) from the African Export-Import Bank (Afreximbank), a Pan-African trade bank. 

In a statement, UBA stated that it would utilise this financial support to prioritise lending to small and medium-sized enterprises (SMEs) that are currently facing challenges due to rising interest rates. 

UBA’s Group Chief Executive Oliver Alawuba emphasised that the facility will significantly enhance its efforts to promote intra-African trade, which has faced significant challenges due to the war in Ukraine. 

Traders in Kenya and other African nations have eagerly awaited the opportunity to trade within the new continent-wide free trade area. 

The African Continental Free Trade Area (AfCFTA) aims to unite 1.3 billion individuals in a $3.4 trillion (Sh452.2 trillion) economic bloc, making it the largest free trade area since the establishment of the World Trade Organisation. 

“We have a long-standing beneficial relationship with Afreximbank, we are delighted with our partnership as we jointly envision better dealings for our customers,” Mr Alawuba said. 

With its strong presence in global financial hubs, UBA says it aims to foster connections between individuals and businesses across Africa through various banking services such as retail, commercial, and corporate banking and innovative cross-border payments, remittances, trade finance, and ancillary banking services. 

Access Bank also said it is hungry for more acquisitions in the country’s vibrant banking sector despite its botched takeover of Centum-owned Sidian Bank. 

It recently confirmed a deal announced by Kenya’s largest lender by asset size KCB Group to sell its loss-making subsidiary National Bank of Kenya (NBK) to Access Bank. 

The deal, whose financial value was not made public by the two lenders will see Access Bank buy 100 per cent of the troubled NBK subject to regulatory approval. 

Access Bank acquired a 99.98 per cent stake in Transnational Bank and paid Sh1.21 billion in cash in early 2020 for a deal valued at Sh1.56 billion. 

Commenting on the NBK transaction, Access Bank Chief Executive Roosevelt Ogbonna said the transaction represents an important milestone for the Bank as it expands in the Kenyan market. 

“We are building a strong and sustainable franchise to support economic prosperity, encourage African trade, and advance financial inclusion thereby empowering many to achieve their financial dreams,” said Mr Ogbonna. 

Access Bank has been expanding across Africa to counter stagflation and dollar shortages in Nigeria that have frustrated businesses, shrinking the lending market. 

The Sh4.3 billion Sidian transaction would have been the second acquisition in Kenya for Access Bank, which acquired Transnational Bank, now called Access Bank Kenya, in 2020. 

“The bank remains committed to growing its franchise in a safe and sound manner in Kenya and the broader East African Community and will continue to explore a variety of organic and inorganic opportunities to grow its market share therein,” said the lender to our queries. 

The buyout by Access Bank deepened the presence of Nigerian banks in Kenya, with UBA and Guarantee Trust Bank already in the market. 

The Kenyan banking sector has witnessed increased interest in the last seven years, with mergers and acquisitions happening. 

Other lenders that have been acquired in the last few years include Fina Bank, K-Rep, Equatorial Commercial Bank, Giro Commercial Bank, Oriental Commercial Bank, Fidelity Bank, Habib Bank, Chase Bank, Mayfair Bank and Jamii Bora Bank.

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