African Expansion: Nigerian Banks Face Tougher Regulatory Hurdles

• Analysts call for increased compliance as regulators tighten rules

Nume Ekeghe

Analysts have urged Nigerian banks operating across Africa as well as those planning further expansion on the continent, to deepen compliance with host-country regulations as African regulators tighten rules governing foreign-owned financial institutions.

The warning comes as The Gambia recently directed commercial banks to begin phasing out non-Gambian employees.

Also, during the week, Kenya approved the transfer of the business, assets and liabilities of Access Bank Kenya to National Bank of Kenya (NBK), paving the way for the integration of the two entities.

Although the developments are different in nature, analysts said they underscore the increasingly complex regulatory environment Nigerian banks must navigate as they expand across African markets.

The developments also highlight the need for lenders to adopt market-specific strategies, strengthen local compliance and invest in indigenous talent rather than relying on a uniform approach to continental expansion.

In The Gambia, the Central Bank of The Gambia (CBG) directed commercial banks operating in the country, including subsidiaries of Nigerian lenders Access Bank, FirstBank, GTBank and Zenith Bank, to commence a phased replacement of non-Gambian employees with suitably qualified Gambian nationals.

Speaking with THISDAY, Director, Deals Advisory, PwC Nigeria, Wale Olusi, said the directive did not prevent foreign-owned banks from operating in The Gambia but required them to comply with the country’s regulations.

“On the Gambia, the regulation clearly doesn’t stop foreign-owned entities or banks from operating, as the case may be, but they must comply with local laws,” Olusi said.

He noted that The Gambia, with a population of about two million, has faced manpower constraints, which have historically resulted in Nigerians and other foreigners occupying senior positions in some institutions.

“The Gambia has a manpower challenge. In fact, a number of Nigerians occupy top positions there precisely because of this gap,” he said.

According to Olusi, the directive was aimed at protecting employment opportunities for Gambians, making it necessary for affected banks to invest more in training and developing local talent.

“What this simply means is that these institutions have to invest in training and empowering locals, building their capacity to do the jobs required, if they wish to continue operating in The Gambia,” he said.

He, however, said the development should be viewed within a broader global trend towards greater protection of local employment, noting that similar concerns had emerged in other African countries and developed economies.

“However, if you put what has happened in The Gambia together with what we’ve seen in South Africa and perhaps a few other African countries, there is a growing concern – not just in Africa, but globally – about migrants or expatriates dominating the job market while locals remain unemployed,” he said.

Olusi said the challenge for governments was to ensure that policies aimed at protecting local employment were matched with investment in human capital, enabling local workers to eventually take up positions occupied by expatriates.

Access Bank Gambia has four Gambians out of seven positions reviewed, representing 57.1 per cent, alongside two Nigerians and one Ghanaian. GTBank Gambia has the highest Gambian representation, with five of seven positions, or 71.4 per cent, held by Gambians, while two are Nigerians.

Zenith Bank Gambia has an even split, with three Gambians and three Nigerians among six positions reviewed, giving each nationality 50 per cent representation.

At FirstBank Gambia, Nigerians occupy three of five positions reviewed, representing 60 per cent, while two are Gambian. Ecobank Gambia, which is not Nigerian-owned, has three Gambians, three Ghanaians and one Nigerian among seven positions reviewed, representing 42.9 per cent, 42.9 per cent and 14.3 per cent, respectively.

The figures cover only publicly identifiable board and senior management positions and do not represent the nationality composition of the banks’ entire workforce.

The varying composition suggests that the impact of the Gambian directive could differ across institutions, depending on the extent of expatriate participation in their workforce and senior management.

In his contribution on the matter, Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, said banks should first establish the actual proportion of expatriates occupying senior positions before assessing the directive’s potential impact on their operations.

“We need to establish what proportion of senior management roles are actually occupied by expatriates. It could be very small. It could be just a few banks that have expatriates in those particular positions,” he said.

Olubunmi noted that the push for greater local participation was not peculiar to The Gambia, saying regulators across African markets had increasingly introduced measures to promote indigenous participation in their financial sectors.

“For instance, in Ghana, if a financial institution is foreign-owned, your managing director and chairman cannot both be foreigners. Either the MD or the chairman can be a foreigner,” he added.

He said international banks would need to increasingly develop local executives capable of managing their operations as part of their long-term expansion strategy.

“The truth is that, for most banks that operate internationally, if you really want to penetrate and grow your market share in a particular market, the best way to operate is to ensure that the business is increasingly handled by locals,” Olubunmi said.

The regulatory development in The Gambia came same week Kenya approved the transfer of Access Bank Kenya’s business, assets and liabilities to National Bank of Kenya.

However, Olubunmi stressed that the Central Bank of Kenya did not force Access Bank to merge the two institutions.

He explained: “To correct an impression, the Central Bank of Kenya did not force Access Bank to merge with National Bank of Kenya. They did not.”

According to him, Access Bank already owned both institutions following its acquisition of NBK and had previously announced plans to integrate them.

“Access Bank owns both entities. Access Bank acquired NBK,” he said.

He explained further that NBK had a stronger franchise in Kenya than Access Bank Kenya, making the consolidation part of Access Bank’s strategy to streamline its operations in the market.

He added that the integration was not a new development, as Access Bank had been working towards securing the necessary regulatory approvals.

“If you have been following Access Bank’s conference calls, you would know that they have already mentioned that they were going to merge both entities,” he said.

The development, he said, should therefore not be interpreted as a regulatory directive compelling Access Bank to consolidate its Kenyan operations, but as part of the group’s previously announced strategy.

Olubunmi said the contrasting developments in The Gambia and Kenya nonetheless illustrated the different regulatory and operating considerations Nigerian banks must contend with across African markets.

He stressed that Nigerian banks should not approach continental expansion with a one-size-fits-all strategy, as the regulatory, labour and competitive environments vary from one market to another.

According to him, banks entering smaller African markets could initially deploy executives familiar with their corporate culture and systems while deliberately developing qualified local professionals to take over key responsibilities over time.

“You can have a five- or seven-year strategy where you initially go in with people who understand your culture and operations, and then gradually identify reputable and qualified Gambians who can take over those roles,” he said.

He also pointed to the commercial advantage of employing local executives, particularly for banks seeking to expand their retail and small and medium-sized enterprise businesses.

He added that local executives could better understand the culture and language of the market while combining that knowledge with the bank’s corporate culture.

“So, I don’t think it will discourage expansion if the business case is there. What it will do is affect your strategy,” he said.