Consistent and strong financial sector reforms in Nigeria in recent years have created a unique opportunity for IFC to strengthen institutions that can promote the private sector in Africa’s most populous country. As a result, IFC’s support for Nigeria’s financial markets is on the rise.
Promoting the financial sector in emerging markets offers IFC development opportunties with high potential impact. IFC’s participation in the sector brings global expertise to encourage the growth and expansion of institutions with local knowledge that can encourage new investment, provide access to finance to new market segments, like small and mediuim enterprises, and strengthen the foundation of the economy.
IFC’s recent activities in Nigeria’s financial sector include several transactions to support trade finance, credit lines to banks such as United Bank of Africa, and an equity investment in Leadway Assurance Company.
IFC has also provided loans and advisory services to numerous institutions to promote housing finance and mortgages, small and medium enterprises, women entrepreneurs, consumer banking and other crucial financial services. The rapid pace of support has translated into an portfolio in the financial sector that now comprises over half of IFC’s investments in Nigeria.
"The steady pace of regulatory reforms in Nigeria’s financial markets has led to consolidation in the industry and created well-capitalized banks," says Solomon Adegbie-Quaynor, IFC’s Country Manager for Nigeria. "IFC is committed to working with financial institutions and the government of Nigeria to sustain the pace of reforms, and we are looking to enter new segments of the market where we can further contribute to developing the country’s financial sector."
The financial sector reforms implemented by Nigeria’s government in the last few years have sharply increased investor confidence in the sector. The reforms began in 2004, when Nigeria’s central bank sharply increased the capital requirement for the country’s banks by 1,150 percent. The spike brought about a rapid consolidation that slashed the number of Nigeria’s banks to 25 from 89.
Other reforms soon followed. The government increased capital requirements for insurance companies, many of which were severely undercapitalized. The change brought about a similar rapid consolidation in the sector.
Meanwhile, the country’s underfunded pension system was reformed, streamlined and revamped to encourage more individual responsibility over contributions and savings. The aggressive reforms have dramatically raised standards in the financial sector and placed it on a very firm foundation—political changes or upheavals are far less likely to impact Nigeria’s financial market institutions in the future than they were in the past.
Strengthened by the reforms, banks are now exploring new opportunities in markets such as consumer and retail banking, pension administration, mortgages, and other areas of the capital markets. They are also expanding their reach beyond Nigeria into other parts of Africa, taking advantage of the region’s underserved financial markets.
For IFC, the strengthened financial sector has also created new opportunities to offer a wider range of financial products and advisory services. IFC’s strategy for the financial sector in Nigeria increasingly focuses on offering products such as trade finance, insurance, housing loans, guarantees on local currency and US dollar loans and bonds, and funding for micro, small, and medium enterprises.
Advisory services forms a crucial part of the strategy. IFC is currently advising on establishing a credit bureau and working with institutions such as Access Bank to help bring financial services to a wider group of people, including women and other previously underserved groups. That should help raise the standard of living for millions of people across the country.
For more information contact:
Houtan Bassiri
Communications Officer
Johannesburg, South Africa
Tel: +27 11 731 3179
E-mail: hbassiri@ifc.org
