Business News
Nigeria's capital rich banks are rushing to set up shop in London to meet growing demand for trade finance, tap into foreign investor interest in African securities and add prestige to their domestic operations.
Intercontinental Bank, one of the fastest growing banks in Nigeria, became the latest to join the rush on Monday, saying it had won approval from Britain's financial market regulator to offer wholesale banking services through a London subsidiary.Intercontinental, which ranks among the 1,000 largest banks in the world, said the UK Financial Services Authority (FSA) had given it approval to provide trade finance services including letters of credit, collections and guarantees. "London will act as a strategic addition to Intercontinental Bank's global expansion drive, providing international investors with access to investment opportunities on the African continent," chief executive Erastus Akingbola said. He said more subsidiaries would open soon "to exploit identified business windows" in Africa, America, Europe, the Middle East and the Far East.
Banks in the world's eighth biggest oil producer have seen explosive growth in recent years as the economy grows at its fastest rate for decades, driven by record oil prices.
Consolidation has cut the number of banks in Nigeria from 89 to 24 in the past few years, and the survivors have been tapping international and local markets to raise capital and grow their businesses at home and abroad.
London is an attractive destination because of its status as a hub for hedge funds and other institutions investing in emerging markets, as well as Britain's strong trade links with Nigeria and the large Nigerian population in the UK. "Short-term it's useful for banks who have a strong equities or fixed income franchise in Nigeria. The UK is a leading distribution hotspot for emerging markets securities," said Fola Fagbule, a Lagos-based analyst with stockbroker Afrinvest.
"It is also very useful for trade finance ... and there is the large diaspora population in the UK -- to some extent it might be useful for capturing retail accounts," he said.
PRESTIGE BOOST
A prestigious UK address is seen as strong selling point back home for Nigerian banks, many of whose wealthiest clients spend their time shuttling between Lagos and London. It also positions the banks to help finance anticipated growth in trade between the UK and Nigeria, already Britain's second-largest market in sub-Saharan Africa, as the West African country develops its ailing infrastructure.
British exports to Nigeria rose to 836 million pounds ($1.67 billion) in 2006 from 535 million in 2000, while imports from Nigeria more than doubled to 218 million pounds. Where Nigerian businesses go, its banks follow.
Guaranty Trust Bank GTB.LG became the first African bank to be listed on the London Stock Exchange last year and in March won FSA approval to begin corporate and retail banking services in the United Kingdom. "The international community is fast acknowledging the strength and relevance of Nigerian companies," GTB Managing Director Tayo Aderinokun said at the time. United Bank for Africa (UBA) UBA.LG established its UK arm UBA Capital in November, which provides African securities to European investors, while in April last year, Zenith Bank ZETH.LG set up a London-based trade finance subsidiary.
