Nigerian Banks in the United Kingdom; Overview and Description

– Nigerian Banks in the United Kingdom –

Nigerian banks in the United Kingdom result from petrodollars and ambitious goals. For both business and retail clients, as well as intermediaries, the subsidiary will provide banking services, such as accepting deposits and issuing mortgages.

About Nigerian Banks in the United Kingdom

When Nigeria’s Zenith Bank opened a UK subsidiary in London–Zenith Bank (UK)–early in 2007, it was the first Nigerian bank to open up a new shop in the country for 25 years.

Since then, the Nigerians have been coming over in force–both with capital raising exercises and with opening subsidiaries. And trade finance is definitely the central spot on their radar screens.

Intercontinental Bank (UK) was established this September in London. There is a natural affinity with London and it makes sense to be there, says Intercontinental’s chief executive officer, Marcus Hopkins.

“The centre of international finance for Nigeria in London,” he adds. A stage of maturity for a bank like ours with national and regional aspirations is to be here in London.

Additional Information

We have the ambition to be a major African player within five years and we’re looking to supplement key offices in West Africa.”

Despite present market conditions, the resilience of trade finance is testimony to the fact that it works and is continuing to function, Hopkins emphasises.

“We are authorized as a wholesale bank to operate in the UK but our mandate really is to look at African, especially West African, trade finance deals.” Intercontinental has a subsidiary in Ghana.

The bank has an operations department in London that handles a “significant volume” of business for letter of credit (LC) collection, says Hopkins–“it’s a good, safe, dependable business”.

“We’re doing the quickest, easiest route to the business we know,” he adds.

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Naturally Trade

Zenith is also looking at trade finance as a core business out of London. “It wasn’t so much a case of following our customers,” says David Colgan, director–business development, at Zenith Bank (UK).

It was to tap into the huge trade flows between Nigeria and the rest of the world, resulting in billions of dollars of LC issuances out of Nigeria.

“If you set up in London and handle a modest portion of this, you can quickly achieve a viable business,” he says.

“Zenith alone issues several billion dollars of LCs each year. We planned to handle 10-20% of this and develop it. That was the starting point for us.”

Zenith’s London team has been offering correspondent banking services for other Nigerian banks as well. “We’re doing more for intermediaries.

Such as trading companies and handling more back-to-backs and transferable,” adds Colgan.

Nigeria’s GTB set up its UK subsidiary Guaranty Trust Bank (UK) last March. GTB also sees trade finance as a key emphasis for the London business.

The parent bank has subsidiaries in Gambia, Sierra Leone, and Ghana.

Domestic Needs of Nigerian Banks in the United Kingdom

Nigeria’s industrial and economic development over recent years has fuelled this confidence among its banks and the consequent moves to the UK.

Nigeria has oil and depositor wealth and it aims to spend it at home and overseas. Nigeria exports crude oil but is flaring off its gas.

However, it is a situation that is increasingly being seen as economically and environmentally unacceptable. Nigeria’s gas industry is a sleeping giant.

However, with the dip in the oil price towards the end of 2008, it remains to be seen how this might impact the country’s spending power and ambitions.

And as commodity prices soared in past years, so have the accumulative costs of imports for Nigerians foodstuffs like rice, flour and wheat; construction-related goods such as cement and steel petroleum products.

“As the volume of Nigerian imports rises year-on-year and the price of these imports also increases, it puts pressure on correspondent banks who haven’t got infinite limits for Nigerian banks,” says Zenith’s Colgan.

Nigerian banks will have to manage these limits carefully. There have been a lot of credit insurance activity and inquiries related to Nigeria in recent months, for instance, says Colgan.

Longer London Pedigree

Two banks moved on from branch status to subsidiaries in the UK a few years before the latest pack have done in recent months.

Union Bank of Nigeria UK received its wholly-owned subsidiary status in October 2004, while FBN Bank (UK), a First Bank of Nigeria subsidiary, threw off branch status two years earlier.

Both banks have had a London presence for over 20 years. UBN has a staff of five overseeing trade finance. We do corporate lending, correspondent banking to major Nigerian banks, and trade finance.

We have visions of doing more West African business–like many banks here, we’re at a stage of expanding,” says Tim Green, the bank’s associate director, trade finance, and lending.

The Pedigree in London

UBN’s parent bank has expanded regionally in West Africa with operations in Cameroon, Benin, and Ghana. The UK subsidiary also has its own representative office in Lagos, with a sub-office in Abuja.

“We can do the international part, whereas the parent bank covers the domestic part,” adds Green.

FBN Bank (UK)’s focus was largely Nigeria until recently, claims Peter Hinson, managing director. But in 2007 the bank set up a Paris branch, specifically for opening up opportunities in Francophone Africa.

“The Financial Services Authority (FSA) places limits on exposure levels to individual countries and with our Nigerian exposure full, we had to look elsewhere–so Francophone Africa.”

“We’re a hugely conservative bank,” says Hinson, “but the advantage we have is that Africa is our backyard – far better than Barclays or HSBC with a few rep offices.”

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Trade Negotiation

“No countries are off our list,” he claims, “except Zimbabwe.”

“We have real global reach out of London,” adds Graham Thorpe, the bank’s head of trade finance. “We have a rep office in Johannesburg too–soon to be a branch, and soon also a Beijing rep office.”

The UK subsidiary also has 10 of its own staff in Lagos.

The parent bank has been negotiating with Ecobank Transnational for two years in an on-off-on series of talks. If the merger does go ahead, says Hinson, between us we would have representation in 16 countries throughout Africa.

“We are awaiting the outcome of these talks before pursuing the creation of other branches in other countries in Africa.”

“We can’t get as much liquidity from the markets now, following the credit crunch, but we’re extremely liquid,” says Hinson.

Trade finance is safe and we’re working with respectable large banks. We’re very comfortable with where we are. Our parent hasn’t gone into the low-quality type of asset that is risky for others.”

Raising capital

Three Nigerian banks–Access Bank, Guaranty Bank, and United Bank for Africa (UBA)–all completed capital-raising exercises in London last year.

UBA and Access each attracted US$300mn from international institutional investors in May and July respectively, while GTB raised US$750mn through global depositary receipts (GDRs).

GTB’s exercise ensured it became the first African company outside South Africa to list on the London Stock Exchange.
UBA set up a UK subsidiary, UBA Capital, last November, and provides African securities to European investors.

Additional Information

UBN’s planned capital raising for Q4 this year has been put on hold for the time being, however–a sign of nervous times.
Access is the latest Nigerian bank to set up in the UK in October, following licensing and authorisation by the FSA in August to operate a full service banking subsidiary in the country.

The subsidiary is a full-service bank, offering a range of products and services to retail and wholesale clients. The UK office brings to seven of the bank’s offshore subsidiaries since it began a global expansion strategy in 2006.

Other Nigerians are on their way: Oceanic, Bank PHB, Diamond Bank, Sky Bank, and First City Monument Bank have all made known their interest in setting up shop in the UK.

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CSN Team.