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Financial Services

Quick Take: SWOT analysis of Nigeria’s financial sector according to Fitch Solutions

The Coronavirus pandemic is top on the list of factors weakening the Nigerian financial sector.

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SWOT Analysis of Nigeria's financial services sector

Nigerian banks, insurance firms, and other financial services providers have the potential for long-term growth in Nigeria which is undoubtedly Africa’s most populous country. This is one of the top strengths of the Nigerian financial services sector, according to a SWOT analysis carried out by Fitch Solutions Country Risk & Industry Research.

The Strengths

Contained in a new report titled “Nigeria: Banking & Financial Services Report Q3 2020”, the SWOT analysis also identified improvements in the regulatory environment as another top strength.

In the meantime, there is an immense opportunity for growth in the Nigerian insurance sub-sector, especially as it pertains to life insurance. As the report explained, this is another major strength for the financial sector, because there is evidence to show that foreign investors are attracted to the country’s insurance sub-sector. Recall that in early March, Nairametrics reported that German-owned InsuResillience Investment Fund had completed the acquisition of 39.25% equity stake in Royal Exchange General Insurance Limited, a subsidiary of Royal Exchange Plc.

The Weaknesses

The Coronavirus pandemic is top on the list of factors weakening the Nigerian financial sector. This is mainly because the pandemic has caused a drastic decline in the demands for loans, even as there is now a high possibility that non-performing loans will skyrocket. This position is similar to one detailed in a recent report by The World Bank, as reported by Nairametrics.

Meanwhile, other weaknesses bedeviling the Nigerian financial industry, according to Fitch Solutions, include the following:

  • Continued lack of major multinational competitors in the wider banking and financial services sector.
  • The limited capacity of a broad section of Nigerians to spend on traditional insurance products due to poverty.
  • The prevalence of fraud is another problem, especially so in the motor insurance sector.
  • The COVID-19 pandemic and lowered oil price are said to have heightened liquidity concerns in the Nigerian financial sector.

The Opportunities

Thanks to reforms imposed by regulators such as the Central Bank of Nigeria, accounting practices are said to have improved considerably, thereby increasing the transparency level, especially in the banking sector.

Still on the opportunities, employers in the financial service sectors are now required to provide group life insurance coverage. This is said to provide an opportunity/improve knowledge of insurance in the country.

Meanwhile, Nigeria’s mostly young population provides immense growth opportunities for current players in the sector as well as future entrants; including foreign investors.

The Threats

  • If the economic recovery doesn’t begin until later in 2021 then domestic demand for banking and financial services will remain muted.
  • Perceptions of the Nigerian banking sector were badly damaged by the crisis in 2009 and have yet to fully recover.
  • Expected higher inflation will weigh on credit demand.
  • Nigeria’s economy remains overly dependent on oil price fluctuations, impacting the potential of the market’s banking and financial services sector.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

1 Comment

1 Comment

  1. Abdullahi Bilal

    June 28, 2020 at 2:24 pm

    I wonder how insecurity couldn’t make part of the threat to the economic and financial growth.

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Financial Services

Jim Ovia is set to earn N9.58 billion in dividend for FY 2020

The highly revered banker is the single majority shareholder of Zenith Bank as he directly owns 3,546,199,395 units of the fast-rising bank stock.

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Jim Ovia: From a clerk to founder of Nigeria's most profitable bank

The founder and Chairman of Zenith Bank Plc, Mr. Jim Ovia is expected to earn a massive sum of N9.575 billion in dividend for the financial year ended December 2020

The highly revered banker is the single majority shareholder of Zenith Bank as he directly owns 3,546,199,395 units of the fast-rising bank stock out of the 31,396,493,787 ordinary shares available. This gives him an 11.29% direct interest in the Tier -1 bank.

It’s however important to note that such dividend is subject to a 10% withholding tax in Nigeria.

READ: Is Zenith Bank thriving on the strength of sound financial indices?

Recall that about a day ago, the Board of Directors of the bank in a statement released via the Nigerian Stock Exchange proposed a final dividend of N2.70, amounting to a total payout of N3.00 per share for the financial year 2020 (interim: N0.30).

This proposal reflects the past year’s robust performance and appears to signal that Zenith bank remains well-positioned to perform in the current financial year. However, there was a lower payout ratio at 40.9% compared to FY’19 (42.1%).

  • Key earnings drivers to the financial year performance under review were a 90 basis points drop in the cost of funds to 2.1%, which propelled net interest income (+12.2% YoY) and a 3.8x jump in revaluation gains to N43.4 billion.
  • These offset pressures from operating costs (the cost to income ratio rose 1.2ppts to 50.0%) and impairment charges (cost of risk rose 40basis points to 1.5%)

READ: Jim Ovia: From a clerk to founder of Nigeria’s most profitable bank

Described as the ‘Godfather of banking in Nigeria’ by Forbes Africa, Jim Ovia is quite popular for his business dexterity and leadership skills, especially in the banking sector.

His early interest in technology was the reason Zenith Bank became the first Nigerian company to have a functional website in 1995 and was able to smoothly migrate its operations from analog times to a digital era.

From a single branch in a residential building, Zenith Bank now has hundreds of branches all over Nigeria and several subsidiaries in other countries. The bank became a Public Limited Company in 2001 and was listed on the Nigeria Stock Exchange (NSE), and later on the London Stock Exchange (LSE).

On the 27th of April 2007, Zenith Bank Plc became the first Nigerian bank in 25 years to be licensed by the UK Financial Services Authority (FSA), giving rise to Zenith Bank UK Limited.

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Financial Services

Zenith Bank declares final dividend of N84.8 billion for shareholders

Zenith Bank declares final dividend of N84.8 billion for shareholders for 2020.

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Zenith Bank Plc

The Board of Directors of Zenith Bank Plc has announced the payment of a final dividend of N2.70 for every share of 50k held by shareholders, amounting to a total of N84.8 billion for the year ended 2020.

This is according to a disclosure signed by the company’s secretary, Michael Osilama Etu and sent to the Nigerian Stock Exchange.

According to the notification, the final dividend will be paid electronically to shareholders on the 16th of March, 2021, subject to appropriate withholding tax and approval from the Company’s Annual General Meeting. Other pre-requisite conditions for payment are;

  • Only shareholders whose names appear in the registrar of members as at the close of business on 8th of March, 2021 will be considered.
  • Shareholders must have completed the e-dividend registration and must have mandated the Registrar (Veritas Registrar Limited) to pay their dividends directly into their bank accounts.
  • In lieu of this, it is pertinent to note that the register of shareholders will be closed on 9th of March, 2021.

Zenith Bank Plc had earlier paid an interim dividend of 30k to its qualified shareholders on 22nd of September, 2020, thereby raising the total dividend declared by the financial giant in 2020 to N3.00, indicating an increase of about 7.1% when compared to the total dividend of N2.80 declared in 2019.

What you should know

  • Zenith Bank reported a profit before tax of N255.9 billion for FY 2020, indicating a growth of 5.2% YoY
  • It also posted a Profit After Tax figures of N230.6 billion for the period under review, indicating a growth of 10.4% YoY.
  • It has total shares outstanding of 31,396,493,787 and officially closed trading today with a share price of N26.

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