E-Financial
Banks Halt Branch Expansion Plans over Tough Economy
Deposit Money Banks (DMBs) in the country are cutting down on plans to open more branches as part of cost cutting efforts to cope with the tough times, particularly in the industry and generally in the economy, according to New Telegraph.
According to sources in the industry, in a bid to drastically reduce costs, most lenders have decided to slow down on their branch expansion plans and, in some cases, have even completely frozen such plans.
A general manager with a tier one bank, who did not want to be named, confirmed this development.
He said: “I can tell you that the business environment is so tough now that unlike in the past when banks used to scramble to outdo each other in terms of who has the most number of branches, the focus today is all about reducing costs.
For instance, instead of the four new branches we planned to open in Lagos this year, we have reduced the number to two.
“It is quite expensive to open, equip, run and maintain a branch, so, banks are trying not to do that anymore unless they are very confident that such a branch will start to generate reasonable profit within a short period,” he stated.
Besides, he revealed the bank where he works was now concentrating on opening smaller, self service centres which, according to him, are far less expensive to set up than the conventional bank branches.
“That (self service centre) is the future of banking. I agree that given the level of development of our society, brick and mortar banking will remain prevalent for some time to come, but any bank that wants to survive the current hard times will have no choice but to cut down on its branch expansion,” he said.
It will be recalled that in addition to sacking over 3,000 staff since the beginning of the year, lenders such as First City Monument Bank Plc (FCMB) and Skye Bank Plc have also shut down unprofitable branches. Analysts attribute the development to the fact that both lenders did not grow organically but expanded via their respective mergers and acquisitions.
Significantly, the country’s biggest lender by assets, First Bank of Nigeria Limited, is also reported to be planning to shut down some of its over 800 branches nationwide as part of efforts to reduce cost.
Mr. Babatunde Lasaki, the lender’s head, Media and External Relations, Marketing & Corporate Communications, was reported a few weeks ago as saying that the bank was in the process of meeting regulatory requirements that would allow it to change the designation of some of the branches.
He disclosed that none of the affected branches would be totally shut down, as they would only be converted to cash centres and ebanking centres.
Similarly, FCMB announced last February that in a bid to cut costs, it had laid off staff, as well as shut down not less than 10 per cent of its branches nationwide.
According to Mr. Diran Olojo, the bank’s Group Head, Corporate Affairs, the lender has decided to shut any branch where it has two very close to each other, in the face of rising operational costs.
Even lenders like Standard Chartered Bank, which has only 42 branches in Nigeria, is also said to have concluded plans to embark on rationalisation of its branches.
Industry watchers point out that the branch rationalisation plans of the banks could pose a threat to the Central Bank of Nigeria (CBN)’s target of achieving 80 per cent financial inclusion in the country by 2020.
According to a report by Financial Research Institute, only 30 million Nigerians have bank accounts out of the 90 million sampled. This means that 60 million Nigerians don’t have bank accounts.
FirstBank has formally denied allegations of fraud in an ongoing court case filed by customer Dr. Agbai Eke, describing the claims as “entirely unfounded and false.”
According to a statement from the bank, their internal investigation points to “unprofessional and unethical dealings” between Dr. Eke and a former bank employee.
FirstBank claims these individuals used a personal relationship to conduct unauthorised transactions without the bank’s knowledge or involvement.
The bank said it has reported the matter to law enforcement authorities for further investigation.
Officials noted that suspects have already provided statements to investigators.
FirstBank also declined to provide additional details, citing the ongoing court proceedings.
“We will refrain from further comments to allow the Court to dispassionately determine the issues before it,” the bank stated.
The case gained public attention following reports by Thisday Newspaper and Arise Television, as well as through a circulating video regarding the legal dispute.
Nigeria is undergoing a significant shift toward digital payment methods, with cash payments projected to decline by 32 percent by 2030, according to Worldpay’s Global Payment Report 2024 (GPR).
This is because access to financial services in remote areas via smartphones has transformed millions of people’s access to the global economy.
According to the report, Nigeria led Middle Eastern and African countries in cash dominance for point-of-sale transactions, accounting for 40 percent of 2024 PoS value from 91 percent in 2019.
The report said the use of cash in Nigeria is higher when compared to the MEA region including Saudi Arabia with 22 percent in 2024, South Africa (30 percent), and the UAE (17 percent).
“Over the past decade, Nigeria has witnessed progress in financial inclusion. According to the World Bank, the percentage of banked Nigerians increased from 30 percent in 2011 to 45 percent in 2021. Similarly, South Africa’s banked population grew from 54 percent in 2011 to 85 percent in 2021,” it said.
The Nigerian Inter-Bank Settlement System (NIBSS) reported that the number of active bank accounts surged to 311 million in 2024, further underscoring the country’s rapid financial transformation.
The global report disclosed that account-to-account (A2A) transfers via the NIBSS Instant Payments (NIP) have emerged as the leading e-commerce payment method in Nigeria.
Furthermore, A2A payments via NQR are now the second most popular payment method at the PoS, trailing only cash. This surge in A2A usage underscores the growing adoption of instant payment systems in the country.
Recent data shows that electronic payment transactions in Nigeria rose to an all-time high of N1.07 quadrillion in 2024. This is a 79.6 percent increase from the N600 trillion recorded in 2023.
Beyond transaction value, the volume of e-payments also saw a substantial increase. The total number of transactions processed by NIBSS rose from 9.7 billion in 2023 to 11.2 billion in 2024, representing a 15.5 percent year-on-year growth.
Also, PoS transactions soared to N19.4 trillion in 2024, marking an 81 percent increase from N10.73 trillion in 2023.
Industry experts attributed the surge in electronic transactions to a combination of factors, including the cash scarcity experienced in early 2023 and the continued implementation of the Central Bank of Nigeria’s (CBN) cashless policy.
The GPR report highlights MEA’s progress in digital payments, with e-commerce transactions accounting for 29 percent of total value in 2014. By 2024, digital payments represented 49 percent, nearly matching the combined value of cash and card transactions (51 percent). By 2030, digital payments are expected to dominate e-commerce, making up 65 percent of transaction value.
“The shift is even more pronounced at PoS. In 2014, digital payments accounted for only 1 percent of PoS transaction value. By 2024, they had grown to one-third of the market. Worldpay projects that by 2030, digital payments will account for 47 percent of PoS transaction value, nearly equalling traditional cash and card payments,” it said.
Nigerian Computer Society (NCS) has expressed concern over the Federal Government’s decision to replace Remita Payment Service Ltd with the Treasury Management and Revenue Assurance System.
Dr. Sirajo Aliyu, president, NCS, who spoke a press conference in Lagos, highlighted the potential impact of the decision on Nigeria’s indigenous Information Technology (IT) sector.
Remita, a subsidiary of SystemSpecs Software Technology Group, has provided payment solutions for individuals and organisations for nearly two decades, maintaining a 100 per cent Nigerian workforce. The government’s move, announced on 4 March, has raised concerns about its implications for local IT firms and the wider economy.
Dr Aliyu warned that replacing Remita could send the wrong message to local IT companies, discouraging investment in homegrown technological solutions.
He emphasised that the Treasury Single Account (TSA), powered by Remita, was a fully indigenous project that had been globally recognised for its success.
“We are concerned that this decision could undermine confidence in Nigeria’s IT industry.”
“While the government has the right to make changes, such decisions should involve extensive consultation with stakeholders to avoid unintended consequences,” Aliyu stated.
He added that the TSA had improved transparency, increased government savings, and enhanced operational efficiency in fund management. The sudden replacement of the platform, he cautioned, could disrupt these benefits.
Prof. Charles Onyeukwu, vice-president, NCS, also urged the government to reconsider its decision, noting that Remita had been selected through a rigorous process involving both local and international firms.
He suggested that instead of replacing the system, an Application Programming Interface (API) could be introduced to allow additional service providers to integrate with it.
“We believe a collaborative approach would ensure continuity while enhancing the system’s functionality,” Onyeukwu said.
A memo from the Office of the Accountant-General of the Federation confirmed that the Treasury Management and Revenue Assurance System would be implemented in two phases, starting on 4 March 2025.
The new system is designed to streamline revenue collection and payments across ministries, departments, and agencies.
The NCS, Nigeria’s premier body for computing and IT professionals, has called on the government to engage with Remita and other stakeholders to find a solution that supports both national development and the growth of the indigenous IT sector.
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