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Oligopoly in Nigeria’s banking industry intensifying – Report

News » Business

IMAGE: LamidoSanusi- CBN Governor and Bisi Onasanya- FBN-boss »

June 19, 2013


If the various round of reforms in the banking industry leading to one consolidation after another in the past was to ensure stronger players in Nigeria and reduce the number of fringe players, a new report indicates that oligopoly in the industry would not go away in a hurry, or anytime soon.

According to a report on the Nigerian banking industry by the research arm of Citi Bank, authored by Kato Mukuru, there is need for Tier 2 banks to consolidate to survive on the long-run, in a clime where competition for size, space and profit have become fiercer.

The report dated May 31, 2013, noted that the industry has become increasingly concentrated and the oligopolistic tendency more intense, judging by parameters such as the top 13 banks accounting for 90 per cent of industry assets at the end of 2012, up from 81 per cent in 2001.

To put the situation in proper perspective, the Citi report noted that in 2001, there were 90 licenced banks, meaning that 77 were outside the club, and seven by 2012 (including the three banks owned by the Asset Management Corporation of Nigeria).

“The number of banks is important because it shows how much pressure has built up within the universe of Tier 2 banks, especially when one considers that the asset share of Tier 3 banks has fallen to 10 per cent of total in 2012 (from 19 per cent in 2001). With an ever-reducing pool of Tier 3 assets, the Tier 2 banks will increasingly have to compete directly against each other and the Tier 1 banks for incremental share. In our opinion, this is what is creating the intense competitive pressures in the system,” the report added.

The Tier banks are mid-players include: Diamond, Skye, Fidelity, First City Monument Bank, Stanbic IBTC Bank, and Sterling; while others like Mainstreet, Keystone and Enterprise banks (three of which were nationalised and subsequently acquired by the Asset Management Corporation of Nigeria), Wema Bank and Unity Bank.

This, the report continued, was also true of profit, as the share of Tier 2 players has fallen more than half from 46 per cent in 2001 to 21 per cent by 2012, while that of the Tier 1 banks rose from 35 per cent in 2001 to 74 per cent.

Over the years, the report shows, the gaps across basic parameters have continued to widen, with total assets of the Tier 3 banks at N2 trillion, which is almost N1 trillion less than that of First Bank’s N3 trillion. In 2012 also, the collective assets of the top 3 tier 1 banks, was more than the N7.7 trillion cumulative assets of the Tier 2 banks. This is just as the combined profit of the tier 2 banks in 2012 was almost half that of Guaranty Trust and Zenith banks combined.


Article Credit: Daily Independent Newspaper

Updated 6 Years ago

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