Ecobank bets on Nigeria’s digital revolution plan to boost customers fivefold

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Lender wants to boost customers while reducing branches
Nigeria investing in lifting broadband access to 30 percent

Ecobank Transnational Inc., Africa’s most geographically diverse lender, is betting that Nigeria’s plans for a digital revolution will increase the number of its customers in the country more than fivefold over the next five years.

The bank is closing branches in the continent’s most populous nation to cut costs while using improving access to the internet to add clients through mobile-phone applications, Ecobank Nigeria Chief Executive Officer Charles Kie said in an interview in Lagos. The Lome, Togo-based lender still aims to expand in Nigeria even after bad loans there contributed to a record loss in 2016.

“It will be a reasonable target to have 40 million customers in five years’’ in Nigeria compared with 7 million currently, he said. Overall, the lender wants to reach 100 million clients in the next five years. “Our strategy for the next five years is to be among the top three banks in this market by profitability.’’

Banks and other companies are increasingly tapping Nigeria’s digital potential as the economy recovers from its first contraction in 25 years. The government is trying to increase broadband penetration to 30 percent of the population by 2018 from 4 percent in 2013. Mobile-phone subscribers in the West African nation of more than 180 million reached 152 million in March, according to the Nigerian Communication Commission website.
Cutting Branches

Ecobank plans to reduce the number of branches in Nigeria to 405 from 479 as it seeks to reach more customers through digital platforms. The move will enable it to cut costs and boost profit even as a weak economy and rising non-performing loans make credit less attractive, Kie said. Ecobank invested in a mobile app that allows customers to check accounts, complete transactions, and make payments instantly in Nigeria and outside the country, he said.

Ecobank wants to ensure that it has easily accessible platforms that allow customers to bank without coming into branches, he said. “All of these are to ensure that whether or not the country is growing, so long as there is trade, so long as there is business, they have solutions.’’

The expansion of financial services in Nigeria is hampered by unemployment and delayed wages after government revenue plunged with oil prices that have more than halved since mid-2014, and companies struggle to obtain dollars to import raw materials. There were 96 million bank accounts in the country at the end of December, of which only 65 million were active, according to Nigerian Interbank Settlement System Plc, which is owned by the central bank and the nation’s lenders.

The lender is confident that expansion in digital banking will boost deposits and help bolster funds for investment, Kie said. E-commerce will account for 10 percent of all retail sales in Nigeria by 2025, or some $75 billion in annual revenue, consulting firm McKinsey & Co. said in a 2013 report.

Ecobank posted a pretax loss of $131 million for 2016 compared with a $205 million profit a year earlier due to impairments from Nigeria as lenders struggled to cope with a shortage of dollars and a 37 percent devaluation of the naira over the past 12 months against the U.S. currency.

With customer acceptance of the digital platform, an increase in the supply of foreign currency to lenders by the Abuja-based Central Bank of Nigeria as well as separation of non-performing loans in Nigeria so it doesn’t impact other parts of the business “we would expect at least the bottom line to see a significant increase,’’ in 2017, Kie said.

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