Nigerian banks found growth in Kenya. Now they need profits

For Roosevelt Ogbonna, the CEO of Access Holdings Plc, the expansion of Nigerian banks into Kenya is a significant step towards unlocking the East African market's vast potential. But while the numbers reveal a growing customer base and rising deposits, the profits are a different story. Nigerian banks have more than doubled their deposits in Kenya over the past five years, but consistently turning these gains into profits has proven elusive.

Kenya's stable currency, deep financial markets, and $147.26 billion GDP make it an attractive destination for banks seeking growth outside their region. The country's East African ambitions align with the Central Bank of Nigeria's (CBN) push for banks to limit shareholders' exposure to offshore operations. Kenya's potential is further underscored by its relatively stable currency and deep financial markets, making it an ideal gateway to the East African market.

Deposits at the Kenyan subsidiaries of Nigerian banks have more than doubled over the past five years, with Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa, and Access Holdings Plc leading the charge. The numbers reveal a growing customer base, but profits are a different story. The CBN's push for banks to limit shareholders' exposure to offshore operations highlights the need for Nigerian banks to prioritize profits in their Kenyan operations.

While Nigerian banks have invested billions of naira in foreign subsidiaries, turning these investments into profits has proven difficult. The challenge is not unique to Nigerian banks; even Nedbank Group, South Africa's fourth-largest bank, has struggled to turn profits in its Kenyan operations. The acquisition of NCBA Group, one of East Africa's biggest lenders, has not yielded the expected returns, highlighting the complexities of the East African market.

The CBN's push for banks to limit shareholders' exposure to offshore operations is a warning sign that Nigerian banks need to reassess their strategies in Kenya. The Central Bank's actions highlight the need for Nigerian banks to prioritize profits in their Kenyan operations, rather than simply focusing on growth. The stakes are high, with billions of naira invested in foreign subsidiaries at risk if profits do not materialize.

As Nigerian banks continue to invest in their Kenyan operations, they need to prioritize profits and adapt to the complexities of the East African market. The CBN's push for banks to limit shareholders' exposure to offshore operations is a clear signal that Nigerian banks need to reassess their strategies and focus on delivering returns to their shareholders. The road ahead will be challenging, but the potential rewards are significant.

The Nigerian banks' foray into Kenya has been touted as a strategic move to unlock the East African market's vast potential. However, the numbers reveal a more complicated story, with profits eluding Nigerian banks despite growing deposits. As the CBN pushes banks to limit shareholders' exposure to offshore operations, Nigerian banks need to reassess their strategies and prioritize profits in their Kenyan operations. The stakes are high, and the road ahead will be challenging, but the potential rewards are significant.