United Bank for Africa (UBA) is leading Nigeria’s banking presence across Africa as it aims to make half its profits in other parts of continent by 2022.
In a report published by The Economist titled ‘As Western lenders retreat, African banks see an opportunity’, the magazine explained the role of UBA in providing banking services across Africa.
Explaining the vision of UBA chairman, Tony Elumelu, the report noted that African bankers have long preached some version of what Elumelu calls “Africapitalism”: the idea that far-sighted, home-grown businesses can drive development.
With the Nigeria banking reform in 2005 surviving banks have been more profitable, with capital to invest abroad.
“Banking is a relationship game,” says Ugochukwu Nwaghodoh, chief financial officer of UBA. “We have local knowledge.”
In a 2016 continental shift chart UBA is ranked third for its presence amongst pan-African banks only behind Ecobank (Togo) and Standard Bank (South Africa).
Other banks on the top six chart are BMCE (Morocco), Attijariwafa (Morocco) and Orabank (Togo).
The continental shift has seen more regional banks are now filling gaps left by their European and American rivals, which are retreating from a continent they once dominated.
Barclays sold a majority stake in its African business last year. Other global giants have also reduced their exposure to African markets, which they judge too small and too risky in an era of tightened regulation. African banks work closer to the ground.
Expansion comes with its problems and in Africa its far more demanding. The pan-African vision often clashes with the reality of a fragmented continent.
Africa’s regional banks earn lower returns and grow more slowly than domestic rivals, calculate consultants at McKinsey.
One problem is the wide diversity of regulations and markets. Another is that banks are too small outside their core markets to grow organically, says Olamipo Ogunsanya, an analyst at Renaissance Capital.
Some have made risky acquisitions, inheriting loan books with hidden troubles. Most banks, she argues, would do better to focus on a few key countries.