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.” Read the rest of this entry »

Tags: Access Bank, Bank PHB, Banking, CBN, Central Bank of Nigeria, Fidelity Bank, First Bank of Nigeria, GTBank, Guaranty Trust Bank, IFRS, Ik Mgbawu, Nigeria, UBA, United Bank for Africa, Wole Famurewa