CASE STUDIES FROM AFRICA

and technology driven. 62 Therefore, in some markets, Nigerian banks will have to focus on
niche services and stick to their core competence.
The Lack of Regional Payment and Settlement Systems
Another trade-related issue at the regional level in most RECs is the high cost of crossborder
payments and the long time it takes in some regions to clear accounts for trade
transactions. In many instances correspondent banks are used in developed countries and
the charges for this service can add up to 5% to the cost of a transaction. Also, the clearance
time for a payment can take up to 5 days because it is done manually. This needs to be
rectified by the creation of regional payment and settlement systems in all RECs. A few
RECs have recently started, or are in the process of developing, regional payment systems,
and these should be expedited. The most advanced seems to be the Regional Payment and
Settlement System (REPSS) in COMESA that went into operation with Mauritius and
Rwanda in late 2012. And in July 2013, the SADC Integrated Regional Electronic Settlement
System (SIRESS) started with South Africa, Namibia, Lesotho, and Swaziland as a pilot
project.
The Lack of Credit Bureaux
In addition, credit rating agencies either do not exist or have arrived only recently in most
African countries, which means that it is difficult to evaluate the underlying riskiness of a
bank asset. This undermines the reliability of risk analysis for a parent bank. In emerging
countries outside Africa, by comparison, foreign-owned banks, in particular, have tended to
underestimate the build-up in credit risk arising from a rapid expansion in credit growth
compared with domestically owned banks.
Differences in Regulatory Regimes
The insights of Ecobank, as expressed in its responses to questions regarding regulatory or
trade barriers in other African markets, indicate that it is important for governments in
African RECs to better integrate standards and regulations governing the banking industry
to help reduce costs and increase efficiency of the banking sector. Banks investing in
different markets in the same REC still face significant regulatory differences regarding
capital requirements, reporting requirements, and licensing requirements, among others,
that constrain their ability to seamlessly operate across borders and increase their scale and
efficiency.
Lessons Learnt and Best Practices
Key Factors in the Export Success of Nigerian Banks
The ‘export’ success of Nigerian banks in other African countries, whilst significant, seems
to have occurred with little encouragement or policy initiatives from the Nigerian
62
Nigerian banks in Uganda are also not making profits. In 2013, Ecobank, Global Trust, and UBA all reported
losses in Uganda: www.theafricareport.com/East-Horn-Africa/west-african-banks-make-heavy-weather-ofuganda.html,
June 17, 2014.
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