Corner turned: The worst of the 2009 crisis is now behind them, but Nigeria’s banks remain cautious when it comes to lending

Its demographics, low banking penetration and rapid economic growth relative to developed markets should make Nigeria fertile ground for financial services. Yet although the continent’s most populous nation also boasts some of its largest banks by assets, just 21% of its population of about 165m is banked, according to a 2011 study by the Central Bank of Nigeria (CBN). Some 93% of Nigerians cannot access a loan, while 74% have never banked, leaving roughly one-third of the population served by informal money-lenders, according to the central bank. Part of this reflects the concentration of branches in urban areas, but poor credit information systems, high operating costs and the lack of infrastructure such as a reliable identity card system have constrained the development of retail banking. At the corporate level, while blue-chip firms have access to bank financing as well as debt markets, small and medium-sized enterprises (SMEs) still face challenges in mobilising funds.

Recent reforms will be instrumental in promoting more real credit growth over the medium term. Ratings agency Standard & Poor’s (S&P) upgraded the sector to a stable outlook in February 2012 based on improved asset quality, capitalisation and corporate governance, although sustaining the momentum of reforms will be key. “The long-term success for Nigerian banks will chiefly depend on them enhancing their risk management, improving their governance, diversifying their loan portfolio and securing their funding profile,” S&P said in its February note.

BOOM & BUST: The banking system has a history of cycles of regulation and liberalisation, although ratings agencies like S&P see more cause for optimism in the current set of regulatory reforms. An indigenisation policy in the 1970s that saw the federal and state governments take majority stakes in lenders was followed by deregulation in 1986, which left a fragmented and weak sector in its wake. The regulator then clamped down again in 1993, followed by a new universal banking model at the turn of the century that brought renewed liberalisation. The 89 banks on the market as of 2004 were plagued by legacies of low capitalisations, limited retail deposits, poor asset quality and weak corporate governance.

CONSOLIDATION: The CBN promoted what became known as “Big Bang” consolidation from 2004, when capital requirements were raised to N25bn ($160m) by December 2005, spurring a scramble for deposits, strategic partners, mergers and acquisition activity, and, in the case of 24 banks, liquidation. While foreign banks survived through capital injections from abroad, domestic banks underwent rapid consolidation. The number of lenders fell to 25 and, following the merger of Stanbic and IBTC shortly thereafter, 24. Total bank capitalisation rose 439.4% between 2003 and 2009, while deposits grew 241.8%, according to the CBN. Aggregate assets expanded from N3.2trn ($20.5bn) in 2004 to N6.6trn ($42bn) two years later, while the capital adequacy ratio (CAR) improved from 15.2% to 21.6% in the same period.

By the middle of the decade, a number of Nigerian banks such as Zenith, United Bank for Africa (UBA) and First Bank were among the largest financial institutions in Africa, providing services ranging from foreign exchange, money transfer and loans to insurance, mortgages and stock trading under one roof. A number of the largest players also began expanding in West and Central Africa as well as further afield.

EXPOSURE: The number of branches also expanded significantly during this period, rising from 3382 in 2003 to 4500 in 2006, but the vast majority of the Nigerian public remained unbanked, and SMEs struggled to raise loans. This was due in part to the fact that the 24 universal banks relied heavily on loans to the downstream oil and gas sector and lending associated with the boom in the Nigeria Stock Exchange. Indeed, local banks were heavily exposed to the stock market as they provided financing both to retail customers to buy equities as well as to brokerages that were seeking to make margin loans to their clients.

As foreign portfolio flows reversed during the global financial crisis of 2008, causing a drawn-out slump in the stock market, loans for the purchase of stocks remained unpaid, while lending to oil marketers went sour as international oil prices dropped, exacerbating the rapid deterioration in Nigerian banks’ balance sheets. Interbank rates then spiked over the summer of 2009, as banks scrambled for liquidity to cover their growing volume of non-performing loans (NPLs). Severe breaches in corporate governance also came to light at that time, including a high concentration of NPLs to politically connected individuals.

CHANGE AT THE TOP: The CBN reacted strongly to the challenges that appeared in 2008 and 2009, with Lamido Sanusi, appointed governor of the CBN in mid-2009, leading the charge in cleaning up the sector. The central bank moved swiftly to restore confidence in the system, removing the executives of troubled banks through a new rule fixing 10-year term limits for CEOs and helping the Economic and Financial Crimes Commission to launch a number of corruption investigations into top management. At the same time, a total of N620bn ($4bn) was injected into nine troubled lenders in 2009. The CBN also announced that it would guarantee all interbank lending, a policy that helped ensure liquidity in the market and stood in place until December 2011.

Sanusi also advocated the establishment of the Asset Management Corporation of Nigeria (AMCON). A quasi-government agency set up in 2010 to purchase NPLs from banks, AMCON is funded through a combination of bond issuances, contributions from the central bank and Ministry of Finance, and fees on banks levied by the government. The agency has been actively purchasing toxic assets since its establishment, having acquired a total of N1.7trn ($10.9bn) of NPLs by July 2012. This so-called bad-bank model has worked well for Nigeria, as evidenced by the steep decline in the industry average NPL ratio, which fell from 34.4% in November 2010 to 4.95% at the close of 2011.

Meanwhile, the nine banks that received an injection of capital from the government in 2009 were told in May 2011 that they faced a deadline of September 2011 to recapitalise, merge or risk liquidation by the Nigeria Deposit Insurance Corporation (NDIC) or nationalisation by AMCON. Wema Bank, one of the smallest lenders bailed out by the government, was able to recapitalise on its own in 2011, while five banks – Intercontinental Bank, Oceanic Bank, Union Bank, Finbank and Equatorial Trust Bank – entered into different merger and acquisition deals. The remaining three banks – Afribank, Bank PHB and Spring Bank – did not succeed in finding investors, and in August 2011 the NDIC created bridge banks to assume the assets and liabilities of the failed banks, which were then sold to AMCON (see analysis).

REGULATORY SHIFT: Beyond this immediate firefighting intervention in 2009 and 2010, the CBN has pushed ahead with a broader platform of reform that will help strengthen the sector in the longer run. Among the major changes has been the dismantling of the universal banking system, a process that started in 2010. Under the new regime, a bank must apply for one of three types of licences – commercial, investment or specialised/development banking. Banks have also been required to divest their non-core banking business lines or establish a holding company if they wish to offer other services. This separation is intended to ensure that financial institutions do not use customer deposits to finance risky investments.

While lenders were initially given until May 2012 to divest their non-core banking lines, the timeline has since slipped. However, by mid-2012 it was clear that at least four banks would convert to holding companies: First Bank, Union Bank, First City Monument Bank (FCMB) and Stanbic IBTC, while UBA opted for a monoline international commercial banking licence. If the remainder of lenders sell their non-banking subsidiaries, this could have an impact on other sectors such as insurance. Other changes implemented at the same time as the reversal of universal banking included certain limits on lending. For example, any single asset class can account for only 10% of a bank’s loan book, an attempt to reduce risk concentration.

REPORTING STANDARDS: Another major shift in policy has been the requirement to adopt International Financial Reporting Standards by January 1, 2012. The effect on individual banks of new accounting rules has varied across lenders. According to research on the top five banks published by Renaissance Capital in July 2012, both First Bank and UBA were positively affected by the change, but it had a negative impact on net profits at Guaranty Trust Bank (known locally as GT Bank) and Access Bank, the worst hit. The shift of reporting requirements has also required investments by all banks in upgrading IT systems and staff skills.

RISK MANAGEMENT: In the wake of the 2009 crisis, the central bank has also stepped up its efforts in the area of risk management. The automation of credit risk management (through systems like enterprise resource management) is having one of the most pervasive effects on the industry by removing the potential for manipulation of the credit approval process. While banks had all diverted their attention to credit risk in the years following the 2004 consolidation, the CBN is now enforcing strict risk management frameworks for asset, credit and all operational risks.

One key area of risk management for any banking regulator is stress testing. During the first half of 2012, the CBN carried out a stress test of the country’s banks, with Agnes Tokunbo Martins, the director of banking supervision at the CBN, telling OBG that the results were positive. “In our second-quarter 2012 stress tests, we assumed the extreme view of a prolonged downturn in oil prices and defaults by oil marketers, and most came out fine, a sign of the resilience in Nigerian banks,” she said. Martins added that “banks are mostly holding good-quality Tier 1 capital”, while the average industry-wide CAR stood at 17% as of June 2012. This places the sector well above the central bank’s regulatory minimum CAR of 10%.

As part of its efforts to increase financial stability, the central bank also has plans to begin implementation of Basel II rules starting at the end of 2012. While banks are generally above the minimum CAR now, implementing Basel II (and subsequently Basel III) rules could mean that lenders would need to raise more capital. “I’m concerned that some leading banks may not be adequately pricing for credit or liquidity risks and that as the CBN moves to fully implement Basel II, some of these banks may struggle to comply with the capital adequacy rules and may have to either raise more capital on the markets or scale down their lending,” Segun Odusanya, the deputy managing director of FCMB, told OBG. “Should they scale down lending, this will create more opportunities for efficient mid-sized banks in the corporate banking segment.”

AFRICAN PRESENCE: While foreign subsidiaries have faced some challenges – UBA registered losses on some, but not all, of its international divisions in 2011 – banks including Zenith in Ghana, GT Bank in the Gambia, and UBA and Skye in Guinea, have made inroads into markets abroad. Indeed, in the face of growing international expansion by Nigerian banks in recent years (particularly during the 2006-09 period), a number of African central banks have moved to raise their minimum capital requirements for foreign lenders, while leaving those for domestic banks unchanged. As an example of this growing trend, Zambia’s central bank raised foreign banks’ minimum capital requirements from $2.5m to $100m in 2011.

Since mid-2011, the CBN has started receiving a growing stream of requests from banks for the right to recapitalise foreign subsidiaries. Its June 2012 circular banned recapitalisation of foreign operations from within Nigeria, which means that some banks that had made forays into neighbouring countries may look to dispose of certain subsidiaries. Others, like UBA, Zenith, Skye and GT Bank, will be forced to recapitalise these units from sources outside Nigeria, through offshore debt or local listings for instance. Meanwhile some banks are looking for ways around the increasingly restrictive foreign regulations. For example, in Zambia, UBA, which expects its African subsidiaries to account for 25% of its profits in 2012, plans to acquire a local bank and maintain operations under that brand, to reduce its capital requirements to $20m.

MARKET STRUCTURE: Nigeria had seven banks with total assets in excess of N1trn ($6.4bn) as of year-end 2011 according to AMCON, with the top four accounting for 55.62% (N762bn or $4.9bn) of sector net profits in 2011. While some of these were newcomers to the top tier, like Access and Ecobank, the list also includes existing heavyweights such as First Bank, Zenith and UBA. The top banks have generally enjoyed improved profits during the first half of 2012, thanks to a high interest rate regime, significant government borrowing and low deposit rates. Indeed, according to the CBN, bank profits for the sector as a whole increased by 90% during the first half of 2012 compared to the same period in 2011.

The picture for the smaller and mid-size lenders is slightly less rosy, however. The mid-tier banks have faced challenges that include falling refined fuel imports, depressed equity markets and unrest in northern states. As a result, the mid-sized lenders have started to compete with the leading banks for larger corporate deals. The strongest of this group have emerged as FCMB (following its acquisition of Finbank), Fidelity, Stanbic IBTC, Skye and Diamond.

COST OF FUNDING: Many of these institutions have also been seeking to change their funding mix in an effort to be more competitive on the lending side. “The mid-sized banks will have to face the challenge of optimising their deposit mix as it appears that the levers of power reside with the largest banks,” Tajudeen Ahmed, the head of corporate planning and strategy at Skye Bank, told OBG. “The cost of doing business will be critical going forward, with those relying on term deposits penalised compared to those with high current and savings accounts deposits.”

Another round of consolidation is widely expected, but the details of potential deals remain complex. Diamond and Fidelity seem like an attractive pairing given their similar target markets and cultural complementarities. Smaller, niche lenders that gained licences as regional banks, like Wema, operating in the south-west, may sustain profitability. Northern-focused Unity Bank on the other hand continues to handle a majority of accounts linked to the Ministry of Defence, sustaining its operations. Each could, however, represent a smaller target for a bank seeking to expand its presence in either the north or the south-west.

However, reaching a deal between two roughly equal-sized institutions could prove tricky. Fidelity Bank stands well positioned for any potential acquisition and has expressed interest in Afribank, since renamed Mainstreet. “The issue of more merger and acquisition activity in the banking sector remains complex since such deals may not be just purely based on commercial considerations,” Rotimi Oyekanmi, the group head of Ecobank Capital, told OBG.

FOREIGN INTEREST: Foreign banks may not have a significant presence in the local banking sector, but a number of recent moves indicate that international brands have an interest in either establishing or expanding a presence. Citi and Standard Chartered have long served the Nigerian market through small subsidiaries, carving a niche in corporate and investment banking as well as among high-net-worth individuals. While Citi also holds a 13% stake in GT Bank, the US giant plans to expand its presence beyond its 12 branches that currently offer corporate services and enter the retail banking market. JP Morgan intends to launch a local currency subsidiary by 2014, having opened an office in 2011. Standard Chartered opened its 29th branch in 2012.

South Africa’s Standard Bank has been the most successful of the foreign franchises on the market, through its local subsidiary Stanbic IBTC, the product of its acquisition of IBTC in 2005. Pursuing an aggressive growth strategy, the lender has more than doubled its branch network to 171. Traditionally strong on the corporate segment, Stanbic inherited IBTC’s robust retail franchise and projects sustained growth in this segment. Gaining one of the first mobile banking licences in 2011, the bank is in the process of restructuring as a holding company to preserve its control over very successful subsidiaries like its PFA, the largest single pension asset manager on the market.

Despite rumours of new foreign entrants to the market over the past three years, only Absa Bank, a unit of the UK’s Barclay’s Bank, has set up a small representative office with few deals to show for it. South Africa’s fourth-largest bank, Ned Bank, gained the right to purchase a 20% stake in ETI in February 2012 with clear plans for growth. FirstRand Bank was awarded an investment banking licence in 2011, with expectations of an acquisition of a local bank in the next few years. Finally, the local subsidiary of France’s Société Générale, whose licence had been suspended in 2006 because it did not meet the new minimum capital requirements, was given the right to recapitalise and resume operations under a new name, Heritage Bank, in July 2012 with a new core investor, International Energy Insurance.

CREDIT GROWTH: By the close of 2011, the banking system had largely stabilised. “2012 is a defining year for the Nigerian financial industry: AMCON has taken the bad debt off banks’ balance sheets and NPL ratios are down to single digits for the first time since the crash,” Kehinde Durosinmi-Etti, the managing director and CEO of Skye Bank, told OBG. The ratings agencies have been well aware of these improvements, with both S&P and Fitch upgrading their ratings on all top-tier and a number of mid-tier banks during 2012.

Some concerns were raised by Fitch in a July 2012 report that highlighted growth in credit and the persistent threat of NPLs, but the central bank has downplayed fears and emphasised that lending to the real economy must develop further. Indeed, since the 2009 crisis, banks may have been taking a too-conservative approach when it comes to lending, instead using funds to buy government bonds. However, the onus to lend should perhaps not entirely lie with the banks, according to some industry participants. “Expansion of loan growth is not just about banks, the government must help stimulate credit demand by creating a more enabling environment,” Sola David-Borha, the group managing director of Stanbic IBTC, told OBG CORPORATE: Bank credit remains skewed towards corporate borrowers. A full 80% of the top 14 banks’ income came from corporate banking in 2011, while only 10% came from retail, according to Source Capital Research in June 2012. The research found the structure of lending relatively unchanged year-on-year in 2011: 20% of corporate loans went to oil and gas, 13% each for manufacturing and commerce, 3.62% for capital markets and 1.55% for agriculture.

Competition is heating up in this segment, but demand remains sluggish with commercial interest rates at or above 18% for all but blue-chip borrowers in mid-2012. On the trade-finance side, the downstream oil sector no longer represents the cash cow it once did before the partial lifting of subsidies on domestic fuel sales and the consequent drop in fuel imports. “Many banks had high concentrations of loans to the downstream oil and gas sector, reaching 30-50% of their balance sheets at times. It is crucial to rebalance corporate lending towards upstream exploration and production, agriculture, wholesale and distribution, food and beverage, construction and infrastructure,” Odusanya of FCMB told OBG.

FOREIGN CURRENCY: Yet in such an import-dependent country, Nigerian banks’ ability to mobilise dollar liquidity is unlikely to be sufficient to cover all requirements. The largest lenders will be best positioned to capitalise on such opportunities, yet a number of midsized banks have also raised funds through credit lines from correspondent banks or through the issuance of Eurobonds. Such foreign currency liquidity will also be in high demand in the upstream oil and gas industry. International banks have traditionally held an edge in cost of funding, but all national banks in Nigeria have established dedicated desks for the upstream sector. While the largest of the domestic banks may have the scale to finance such deals alone, most tend to prefer club deals or loan syndication in order to avoid excessive risk concentration.

INFRASTRUCTURE: Another potentially important area of activity for the banking sector is financing infrastructure. The CBN established a power infrastructure development fund in 2010, which was later extended to the aviation sector, worth N300bn ($1.9bn). The aim of this fund is to extend the maturity of bank loans to the two sectors to between 10 and 15 years while capping interest rates at 7%. Channelled through the state-owned Bank of Industry, these funds will play a key role in financing loan firms in the process of power privatisation. But Nigeria’s private sector lenders may not be fully prepared to enter into the business of infrastructure financing, according to Aigboje Aig-Imoukhuede, the group managing director at Access Bank. “On the supply side there is currently a huge capacity constraint due to lack of specialised institutions with the skill and capital required to finance infrastructure loans,” he told OBG.

The services sector, and telecoms in particular, has also tapped local banks’ funding capacity. Over the five years to 2011, 64% of syndicated lending has gone to telecoms, while 20% has gone to oil and gas, according to an analysis by First Bank. MTN Nigeria raised a N250bn ($1.6bn) syndicated loan from 15 banks (13 of which were Nigerian) in 2010, testament to the lenders’ appetite for the telecoms sector. In a landmark deal in 2011, a consortium of eight Nigerian lenders (First Bank, Zenith, Access, Fidelity, UBA, Bank PHB, GT Bank and Oceanic) structured a $650m syndicated loan for operator Etisalat Nigeria. Meanwhile the three largest banks (First Bank, Zenith and UBA) extended a $30m loan to Shell Petroleum Development Company of Nigeria for its contractor funding.

SMALL & MEDIUM: Competition for corporate business will likely continue to heat up as mid-sized banks try to compete for business with the larger lenders, but the provision of capital to SMEs remains limited despite central bank support. “The banks have a tendency to focus on the big customers but, with the current Transformation Agenda of President Goodluck Jonathan, must shift their focus to the ‘real market’ as SMEs employ 32m people in Nigeria and comprise over 17m businesses,” Muhammad Nadada Umar, the director-general and CEO of the Small and Medium Enterprises Development Agency of Nigeria, told OBG.

SMEs’ access to funding remains challenging in a banking environment characterised by high interest rates, stringent requirements for collateral and the short maturity of credit. For their part, the banks argue that opaque accounting standards and the challenges of identification make it difficult to lend to smaller businesses. Yet some have made inroads in this segment, taking steps to educate business owners, which in turn can reduce risk. Diamond Bank, for instance, offers free training for entrepreneurs in partnership with the Lagos Business School.

Authorities have also been playing their part in fostering this intermediation. The CBN launched an N200bn ($1.3bn) SME Credit Guarantee Scheme (SMECGS) in March 2010, focusing on the manufacturing, agricultural, educational and distribution sectors and guaranteeing up to the lesser of N100m ($640,000) or 80% of the loan value. A second programme – the N200bn ($1.3bn) SME/Manufacturing Sector Refinancing/Restructuring Fund – disburses funds through the state-owned Bank of Industry. The CBN announced in July 2012 that the SMECGS had only received 19 applications worth N980m ($6.3m) since its inception. However, the refinancing fund had disbursed the near totality of its N200bn ($1.3bn) to 539 firms in 12 sectors by the close of 2010.

Meanwhile, the National Directorate for Employment has launched support and training programmes for young entrepreneurs, seeking to develop their capacity and the bankability of their projects. Bankers do expect higher lending to SMEs in coming years. “The recent wave of consolidation is likely to encourage a diversification of clientele into areas previously less focused on like SMEs, indigenous oil and gas, agriculture and retail,” Durosinmi-Etti of Skye Bank told OBG.

While many of these SME loans will be directed to general trading, agricultural financing has emerged as a key priority for federal authorities. Indeed, another important fund established in 2010 by the CBN and the Ministry of Agriculture is the N200bn ($1.3bn) Commercial Agricultural Credit Scheme, a facility meant to share risk between commercial banks and the central bank. The aim is to cap interest rates on these loans at 9%, with the CBN bearing the interest rate subsidy during repayment. While originally designed to support large-scale commercial agriculture projects, it was quickly extended to small-scale farmers. By May 2012, the CBN had disbursed some N175bn ($1.1bn) under the scheme to 222 projects. While 16 banks have participated in the scheme, the most active have been UBA, Union Bank, Zenith and Skye Bank.

RETAIL: Despite significant opportunities offered by Nigeria’s vast demographics, access to retail banking remains limited. Around 4m people become eligible for banking services annually due to population growth, according to the CBN. Covering all these individuals would require the banking industry to expand its client base by 16% every year, yet this has not been the case. An April 2012 World Bank report on financial inclusion found that 13% of Nigerians in the poorest quintile had a bank account, far fewer than the 64% of the top quintile. Similarly, GT Bank estimates that 46.3% of Nigerians between the ages of 15 and 24 are entirely excluded from financial services. “The time is ripe for development of retail banking,” Oti Ikomi, the managing director and CEO of Keystone Bank, told OBG. “Innovation in ATMs, mobile, internet and electronic banking is offering ways for everyone to come into the financial system.”

There are some 25m payment cards in circulation, but with widespread multiple card ownership among the mid- to upper-class population, estimates vary as to how many individuals hold cards. While microfinance has played a minor role in fostering access to credit among the poorer population, lenders are aware of the need to build a strong retail base for long-term growth (see analysis). “To be a successful commercial bank in Nigeria now, you need to diversify your portfolio in both the wholesale and retail segments, drive low-cost deposits and have a robust risk management framework,” Odusanya of FCMB told OBG.

Still, some banks are more aggressively targeting retail clients. First Bank has a long-established lead in this segment, capitalising on a well-established brand, while other large banks like Zenith and UBA have had less success in leveraging their large branch networks. Banks like Diamond, GT Bank and Stanbic IBTC have also been pursuing retail customers.

HOME LOANS: The mortgage market remains in its infancy, with the state-owned Federal Mortgage Bank of Nigeria dominating the segment. Yet with mortgage penetration below 1% of GDP in 2011 according to the Federal Housing Authority, housing credit remains limited. Although a mortgage decree of 1989 liberalised the sector and paved the way for private mortgage providers like Aso Savings and Loans, the longest maturity on the market remains low at seven years, while interest rates can reach 20%.

A key challenge for retail banks has been the identification of borrowers in a society where an estimated 100m citizens do not hold identification cards, according to the National Identity Management Commission. While successive governments have led efforts to institute an ID system, the CBN took the reins in June 2012 when it announced that it would issue new national ID numbers from September 2012 as part of its “Know Your Customer” campaign for banks.

CREDIT HISTORY: The implementation of the Nigeria Uniform Bank Account Numbering scheme is expected to rationalise bank identity tracking. This should support the effectiveness of the three credit bureaux established since 2008 – Credit Reference, XDS and Credit Registry Services. Since 2011 the central bank has required all banks to share information with at least two of the three bureaux, which in turn pool information among themselves.

The CBN issued a financial inclusion policy in 2011, aiming to boost access to formal financial services to 70% of the population by 2020, up from 36% currently. Recognising the deficit in access and the relatively poor reputation of microfinance, the main driver of growth is expected to be mobile banking services as well as the agent-banking model. The latter entails the use of branch-based sales agents who seek out new business by visiting local SMEs and soliciting customers in public areas such as shopping centres. “Some 80% of the market is made up of SMEs that are interested in ownership and not leasing,” Chuka Onwucheka, the CEO of Aquila Leasing, told OBG. “The larger companies, on the other hand, want nothing to do with ownership. They want fixed payments and no assets on their books.” Another potential driver of growth in the retail segment could be non-interest banking, given that about 40% of the population is Muslim. The first sharia-compliant licence was awarded to Jaiz Bank in 2011. In January 2012 Stanbic IBTC was given an operating licence to offer non-interest banking services and commenced operations. Applications from Al-Barakah Microfinance Bank and Sterling Bank are also being processed at present.

OUTLOOK: While the sector fell short of expectations of a full turnaround in 2011, balance sheets have improved, and banks are now focused on costs and improving efficiency. “There is no longer a banking crisis in Nigeria,” AMCON’s CEO, Mustafa Chike-Obi, told local press in January 2012. “Banks have clean balance sheets, they have adequate capital and we did not lose a single depositor’s money.”

Moreover, first-half results for 2012 marked a turnaround in the industry’s profitability, with net interest margins continuing to rise, thanks in part to an improvement in the quality of loans. Interest margins are expected to improve, so long as oil prices (and thus the exchange rate) continue to remain largely stable.