Nigerian banks are in a fierce competition for new business as companies try to bolster their balance sheets before stricter reporting standards are imposed at the end of the year, industry officials said. Sub-Saharan Africa’s second-biggest economy sees itself as rivaling Johannesburg in the coming years as an African financial services hub, but its banking transparency lags even smaller rivals such as Kenya.

The Central Bank if Nigeria (CBN) has ordered Nigerian banks to adopt a common financial year-end accounting standard to restore investor confidence and enable comparisons within the sector.

Companies currently issue quarterly reports based on varying financial calendars, making it difficult for analysts to compare one bank with another. “Everyone will be standing on common ground, which makes it better to analyze banks and rank them,” said Wole Famurewa, Head of Research at PHB Asset Management.

Weak disclosure requirements in Nigeria have fuelled concerns about the health of its banks, particularly their exposure to falling capital markets after explosive balance sheet growth in recent years saw them take on higher levels of unsecured risk. Nigeria’s minimal reporting standards only demand the quarterly publication of gross earnings, pre-tax profit, and net profit. The stricter reporting rules will provide a clearer picture of a financial institution’s balance sheet and spotlight the country’s strongest and weakest banks. “It’s going to show the actual financial standing of each bank,” said a senior bank executive, who wished not to be named. “We will be able to know the strong banks in the system because the financial year comes at the same time.”

Banks have intensified their drive to attract new business — buying full-page advertisements, sponsoring golf events and throwing concerts — and grab a greater share of Nigeria’s under-banked market of 140 million people. “For most institutions, what you will see is a more aggressive pursuit of deposit liabilities, which is where the funding is coming from,” said Ik Mgbawu, Executive Director at Fidelity Bank. “The larger your deposit bases, the larger your share of the market.”

Some of Nigeria’s biggest banks have already adopted international reporting standards, which are even stricter than common year-end standards. Nigeria’s United Bank for Africa, First Bank, Access Bank , Guaranty Trust Bank have already adopted International Financial Reporting Standards. The CBN recently said all banks will need to adopt IFRS by the end of next year.

Visit the website of the Central Bank of Nigeria
Visit Bank PHB’s website
Visit Fidelity Bank’s website
Visit United Bank for Africa’s website
Visit First Bank’s website
Visit Access Bank’s website
Visit Guaranty Trust Bank’s website

Source(s):
CNBC