“I’ve been unable to open the One Bank app for over five days,” a Sterling Bank customer who asked not to be named told TechCabal. 

While the bank notified customers about possible service disruptions due to the upgrade, it did not provide specifics. 

“A core banking application is a critical tool for all financial institutions, so an upgrade of this nature is a big deal,” said a software expert at a Nigerian bank who asked not to be named.  

Building these systems is time-consuming, expensive, and risky. A botched system upgrade at Royal Bank of Scotland (RBS) in 2012 left over 6 million customers unable to access their accounts. The bank was later fined £56m by regulators. 

SEABaaS, its new software, was built to Sterling Bank’s specification, three people with knowledge of the matter told TechCabal. A Google search shows that SEABaaS is also a product by Bazara Tech Inc., a Nigerian software company, suggesting that they may have developed the new software.

According to Bazara Tech Inc. ’s website, “SEABaaS is a future-proof, platform-agnostic core banking SaaS solution designed to elevate user experience for enterprise customers. Its architecture features microservices, APIs, hybrid cloud, and multi-cloud. It also spans a unified 360-degree customer view, AI and machine Learning capabilities, and intuitive user interfaces.”

Bazara Tech Inc. did not immediately respond to a request for comments. 

Sterling Bank previously used Temenos T24, a banking software used by Keystone Bank and the Central Bank of Nigeria. Finacle is another popular core banking software option First Bank, Stanbic IBTC, UBA, and FCMB use. 

Changing its banking application could be driven by cost considerations, difficulties in integrating with existing legacy systems, or attempts to avoid vendor lock-in. 

Sterling Bank did not respond to a request for comments. 

Sterling Bank will share details of the new banking software and migration process next week after it solves the current downtime, two people with knowledge of the process said. The bank considers the development of its custom banking software a major move in Nigerian banking, the same people said. 

Before that grand rollout to the press, it will need to pacify customers, many of whom could still not use the One Bank app at the time of this report, so as not to jump ship while it continues its migration. 

While the Central Bank lifted a directive restricting banks from “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges” in December 2023, it began asking banks to block the accounts of p2p traders by May 2024. 

On August 23, 2024, a high court in Uyo, Nigeria, denied an application to unfreeze Patrick Okon’s Kuda bank account. The restrictions on his account were directly linked to crypto payments. In April, the Economic and Financial Crimes Commission (EFCC) asked a court to block over 1,000 bank accounts over crypto links. 

In March 2024, Nigeria’s financial regulators blocked prominent fintechs from onboarding new customers for five weeks as a currency crisis worsened. It moved against Binance on claims that the platform allowed for manipulation of the naira and detained two of the company’s executives. 

While the case against the detained Binance executive Tigran Gambaryan drags on, the CBN compelled fintechs to block any account believed to be trading crypto. The SEC, which issued last week’s crypto licences, also held several meetings in May suggesting that exchanges should block p2p transactions out of patriotism. 

These policy flip-flops make it likely that banks and fintechs will continue to distance themselves from crypto-related activities. 

“Crypto is still persona non grata. The CBN has not openly accepted it yet,” one bank executive who asked not to be named told TechCabal.

Banks are ignoring the provisional licences the Securities Exchange Commission  (SEC) issued to Quidax and Busha, said highly placed executives at prominent fintech startups.  

Omotimi Agama, the SEC’s director-general, insisted to TechCabal that “the CBN has lifted any ban.”

While Agama’s position is accurate, banks and financial institutions prefer to play it safe with the Central Bank, always choosing caution. 

“The devil is in the details,” a top executive at one of the fintechs told TechCabal.  “The [guideline] is confusing, and the processes are challenging.”

Chike Okonkwo, the founder of Gamic, a blockchain startup, that claims to have been speaking to the SEC since 2019, understands the banks’ position. 

“If that circular [greenlighting] the banking of crypto firms is binding, why can’t retail traders freely add crypto to the description of their banking transactions?”

Busha, one of the new licensees, is more optimistic and anticipates a better relationship between banks and crypto companies. 

“The issuance of the crypto licences is a critical step in maturing the industry. It means that users can engage with operators with increased confidence, which should generally deepen the market,” a spokesperson for Busha said. The company also claims that it is ready for whatever “tight but effective regulations” are deemed necessary by the CBN.

Until then, banks and fintechs will continue sitting on their hands in understandable fear of the CBN’s hammer. 

“Nigerian banking laws are not customer-friendly,” a highly placed fintech executive told TechCabal, adding that “Financial institutions [retain] the right to freeze any account they have reasonable suspicions about any infraction or illicit activity.”

Are crypto trades illegal? Two new licences and the CBN’s December 2023 directive say they’re not. However, one operations manager at a commercial bank states, ” We can only acknowledge the license after receiving instructions from the CBN, our regulator.”

It was always going to happen. When Nigeria’s Central Bank announced in March 2024 that it was raising the capital requirement for commercial banks by as much as tenfold, no one was surprised. The absence of surprise did not make the task less daunting—Nigeria’s commercial banks have two years to raise ₦4 trillion ($2.9 billion). 

For many of the banks, it’s not their first rodeo. In 2004, the minimum capital requirement was increased to ₦25 billion, leading to several mergers and acquisitions. 

However, the central bank’s decision to exclude retained earnings—including FX gains—makes the capital raising in 2024 efforts more daunting. That clause has forced banks to rely on selling shares to retail and private investors. 

While it makes for a challenging timeline for banks, it’s a significant revenue opportunity for investment bankers, accountants, and lawyers. 

Investment bankers, accountants, and lawyers could earn as much as ₦113.2 billion ($82.07 million) in fees, according to capped fees stipulated in the Investment and Securities Act. Nigeria’s Securities and Exchange Commission (SEC) has a 2.83% cap on the fees these professionals can charge on equity raises. 

“Most of the time, we don’t charge the maximum because of competition. There is always someone willing to take a lower fee. Also, if the transaction is quite significant in value or in size, it can still amount to a large amount,” an investment banker who asked not to be named so he could speak freely told TechCabal. 

Some issuing houses— which help banks select the most suitable approach for their capital raise and oversee the process—charge under 1% for capital raises, three people with knowledge of the matter said, citing competition. Fidelity Bank, for instance, listed nine issuing houses in its rights circular. 

Lawyers also face the same problem. Competition has led to “awful” fees, a lawyer at a Lagos-based law firm helping more than five banks raise capital told TechCabal. According to the SEC’s rules, legal fees are capped at ₦10 million for lawyers advising on the rights issue. 

However, most law firms often make less than the capped fees. “There’s a lot of negotiation involved and if you refuse the bank’s fees, they just take their business elsewhere,” the lawyer added. 

Lawyers conduct due diligence on the issuer to identify potential risks, and draft and review key documents such as the prospectus, placement agreements, and subscription agreements. They ensure compliance with relevant laws and that all material information about the issuer and the offer is accurately disclosed, protecting against legal claims and helping investors make informed decisions.

Other professionals like auditors and accountants also make money from a rights offer but their fees are capped at ₦4 million and ₦7.5 million, respectively, according to the SEC’s rules.

The SEC and the Nigerian Exchange Limited (NGX) also make money from each public raise through fees. The SEC’s fees are capped at ₦500,000 for the first ₦1 billion and 0.15% on the balance above ₦1 billion. The stock exchange can make a maximum of ₦ 400 million. 

The bank recapitalisation will strengthen the banking sector and help push Nigeria closer towards the government’s goal of becoming a $1 trillion economy by 2030.

While it might benefit Nigeria in the long run, for now, the bank’s supporting cast is benefiting from the new capital raise. 

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While the value of the transaction has not been disclosed, KCB Group announced in March it agreed to sell National Bank for 1.25x of the bank’s book value. Given NBK’s book value of $79.77 million in 2023, the deal could be priced around $100 million.  

“I am pleased to inform you that the process is nearing completion and is only awaiting the required regulatory approvals, for which we believe we should be concluding very soon. In the coming months we shall communicate the next steps,” Joseph Kinyua, KCB Group chairman, said during the company’s H1 2024 earnings call on Wednesday.

KCB Group acquired NBK in 2019 and has spent over $60 million to ensure it meets CBK’s minimum capital requirements. The Nigerian lender is expected to inject more capital into NBK.  

Access Bank did not immediately respond to a request for comments.

“We are on the tail end of the process. I want to acknowledge and make a special mention of the contribution of the National Bank team, it’s not the easiest of a performance environment as it is in the market and when you have the uncertainty of a transfer and you continue to perform, you truly deserve a special mention,” said Paul Russo, KCB Group chief executive.   

The acquisition will expand Access Bank’s footprint in Kenya and could be concluded later this year. The deal is Access Bank’s second acquisition in Kenya under five years after the lender acquired Transnational Bank in 2020. NBK has a nationwide network and will increase the bank’s branches from the current 22.

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Four people with knowledge of the matter told TechCabal that the downtime was caused by a problem with the website’s domain name system (DNS) configuration. 

“They had issues with their domain name registration, and they had to make some changes or move it to a different domain name service,” a Chief Technology Officer (CTO) at one of Nigeria’s biggest fintechs told TechCabal. He asked not to be named so he could speak freely.  

Those comments suggest that GTBank forgot to renew ownership of its domain name. It may have presented an opportunity for unknown persons to buy the domain name in the hope that the company would be willing to pay a significant amount. 

“If GTBank has already patented its [website] name, they simply need to report the matter to the domain host, and after a few processes they can retrieve the site,” said a web developer who asked not to be named. “It is not a matter that can be simply resolved in a day. It will take time.”

GTBank did not immediately respond to a request for comments.

Lapses in renewing a company’s domain name are common. In 2015, Google missed the deadline to renew ownership of “google.com,” and a former employee bought it for $12. Google, which also owned the domain service provider, Google Domains, quickly reversed the transaction.

Microsoft also forgot to renew ownership of the hotmail.co.uk website in 2003.

“The custodian of the email tied to the domain name may have simply stopped working at the bank and didn’t hand it over to someone else,” one developer told TechCabal. He also suggested that the bureaucracy involved in vendor payment may have delayed the renewal.

At the time of this publication, some GTBank customers could access the website while others couldn’t. The problems with access could be linked to DNS propagation, which refers to the time it takes for changes to the domain record to take effect across all servers.

It could also be caused by a security feature called HTTP Strict Transport Security (HSTS) that forces browsers to connect to the website only over a secure encrypted connection. Banks use this feature to secure customer information.

According to the Central Bank, national banks like Union Bank are required to maintain a minimum CAR of 10%. According to Fitch estimates, Union Bank reported 16% CAR in Q3 2023, above its threshold. 

Fitch lowered Union Bank’s long-term issuer default ratings (IDR) from ‘B-‘ to to ‘CCC’. It also downgraded the bank’s national long-term rating. However, it removed Union Bank from negative watch.

The credit rating agency warned that an extension of the breach in CAR requirements could lead to a further downgrade in the bank’s viability ratings, which measure an entity’s relative ability to meet financial commitments.

The new credit ratings will pressure Union Bank’s new leadership to strengthen the focus on buffering its capital base to tolerate naira depreciation and credit losses. The bank’s recovery will depend on internal capital generation and execution of an agreed-upon recapitalisation plan pending its merger with Titan Trust Bank. 

In January 2024, the CBN dissolved Union Bank’s leadership and appointed a new CEO due to regulatory infringements, corporate governance breaches, and involvement in activities that threatened its financial stability. 

Union Bank did not respond to a request for comments.

Nigeria’s second-oldest lender faces significant risks due to its lending practices. Single-borrower and industry concentrations accounted for 63% of its gross loans in 2023, Fitch said. The foreign loans–half of the gross loans–have also inflated due to naira devaluation. The bank’s gross loans grew 38.1% to ₦1.4 trillion compared to ₦.1.0 trillion in 2022, according to its latest unaudited financial report.

In the nine months of 2023, Union Bank’s gross earnings grew 120% to ₦ 309.1 billion due to lending and currency devaluation gains. Its profit before tax saw a significant 461% jump to ₦102.3 billion compared to the previous year.

Union Bank came under pressure in December 2023 after a probe into the activities of the CBN under former Governor Godwin Emefiele alleged that the bank’s 2022 acquisition by Titan Trust Bank was funded by “ill-gotten wealth.”

The report claimed Emefiele acquired Union Bank of Nigeria for Titan Trust Bank Limited through proxies. Titan Bank denied the allegations.

The report alleged that the ex-central banker used two Dubai-based companies, Luxis International DMCC and Magna International DMCC, to set up Titan Bank. In 2021, Titan Bank sought the CBN’s no objection to its proposed consolidation with Union Bank. It first acquired 91.5% of Union Bank’s shares and completed the takeover by 2022.

The lender extended the deadline for its public offer from August 14 to August 23 after securing approval from the Securities & Exchange Commission (SEC), according to a regulatory filing on Tuesday.

The extension will “provide shareholders with ample opportunity to subscribe to their rights.” Access Holdings is offering 17.7 billion new ordinary shares at ₦19.75 each. The bank will use the funding to pursue its global ambitions.

“During the extended period of the Issue, dealings by the Company’s insiders on the Company’s shares will continue to be strictly limited to participation in the Rights Issue as earlier approved by the Exchange in respect of the Non-Dealing Period on the Company’s Audited Interim Financial Statements for the Period Ended June 30, 2024, until 24 hours after the publication of the Interim Financial Statements,” it added.

The extension comes 24 hours after Zenith Bank, Nigeria’s largest bank by market capitalization, flagged off a combined offer to raise ₦290 billion ($182 million) in line with new capital requirements of Nigeria’s Central Bank. Fidelity Bank, a tier-2 commercial bank, and GTCO, a Nigerian financial services group valued at ₦1.39 trillion, closed their public offers on August 12.

On July 9, Access Holdings told shareholders and regulators that it seeks to “become the world’s first truly African global brand in the financial sector.” In two decades, Access Holdings grew aggressively from a mid-sized lender to the biggest banks on the continent through strategic acquisitions. The lender now operates in 18 countries.

It will invest 65% of the raised capital to grow its loan book, spend 20% to upgrade its infrastructure and the remaining 20% will be used to set up new branches across the country.

Zenith Bank is offering 5.2 billion shares at ₦36.00 per share to existing shareholders and 2.7 billion shares at ₦36.50 to the general public. The offer opened on August 1 and will close on September 9, 2024.

For Zenith Bank, which became a publicly traded company in 2004 and now holds a market cap of ₦1.9 trillion, the appeal for its shares is the history of maximizing shareholder value.

“We paid a dividend of ₦4 per share–the highest paid by any bank in Nigeria. The trend has been sustained for the last five years. We paid the shares from organic profits without FX revaluation gains. Zenith Bank’s offer is investors’ delight,” Adaora Umeoji, Zenith Bank’s Group MD/CEO, said during her presentation.

Zenith Bank also mentioned its growth over the decades from a mid-size lender to the largest tier-1 bank by market value. Its corporate banking arm contributes 58% to the group’s revenue, while the retail segment accounts for 42%.

“All the subsidiaries are making almost 20% profits and contributing to group profits,” Umeoji said.

What will Zenith use the money for?

35% of the total capital raised—₦99 billion— will be used to fund the strategic expansion of the banking business with a plan to expand footprints in West Africa and set up shop in Paris, the French capital to consolidate Francophone expansion. The

With 33 million customers, Zenith Bank will focus on the retail and SME segments. 45% of the total capital raised—₦128 billion—will be used for working capital to serve both segments. The remaining 20% of the proceeds₦57 billion—will be invested in IT infrastructure.

“The proposed business combination of both institutions will create one of Nigeria’s leading financial institutions,” Providus Bank told customers in an email seen by TechCabal.

Unity Bank, the product of a 2006 merger between nine banks, has struggled since 2007, racking up losses and bad loans. It will need a loan from the Central Bank to make this merger happen. A letter seen by TechCabal showed it asked for a ₦700 billion loan. 

Despite its massive debts and a history of distressed banks being complex businesses to buy, Providus is looking to expand its retail footprint, said one banker who asked not to be named. Unity Bank has 240 branches, ten times the number of Providus branches. 

“The business combination will ensure that Providus Bank has footprints in major cities around Nigeria,” Providus claimed. 

While many social media commentators have questioned the deal, one finance analyst speculated that the CBN may have been unwilling to allow a second bank failure following the revocation of Heritage Bank’s licence in June 2024. 

For Unity Bank, it marks another fortunate escape for an institution that has often seemed on the brink. It missed a 2010 deadline for recapitalisation after billions in losses driven by bad loans eroded shareholder capital. 

Despite eventually raising capital in 2011 and recovering around ₦53 billion in bad loans, Unity Bank was soon in the red again. By 2018, it had accumulated losses of ₦338 billion and by 2023, shareholder capital was again wiped out, prompting speculation that its licence would also be revoked. 

Its precarious cash position will make this seem like an acquisition, but in the end, Providus will get a partner with a retail footprint and will congratulate itself for not taking on Unity Bank’s liabilities in the short term. 

On Monday, the lender reported $229 million (KES29.6 billion) in net profit, up from $203.4 (KES26.3 billion) in half-year 2023, on strong interest income performance. Equity Group’s interest income rose 22% to $656 million (KES84.8 billion) against high inflation and interest rates.

Equity Group’s strong performance comes when top Kenyan banks are betting on regional expansion as growth slows in East Africa’s biggest economy. Double-digit growth in the region has offset a dip in earnings from Kenyan operations.

“We are now a regional bank, with the bank slowly moving half the balance sheet and P&L out of Kenya,” said James Mwangi, group managing director and CEO.

“The group’s regional subsidiaries have improved efficiency, contributing 47% to the group’s balance sheet in terms of deposits and loans, and driving a 55% revenue growth.”

The bank also recorded a steady non-interest income growth by 16% to $737.2 (KES95.1 billion). Customer deposits grew 11% year-on-year to $10 billion (KES1.3 trillion), and its customer base now is 20.7 million.

The growth in deposits saw a 55% increase in cash and cash equivalents to $2.6 billion (KES341 billion) and growth in investment securities to $3.5 billion (KES459 billion), giving the lender a strong liquidity position.  

Equity’s gross non-performing loans (NPLs) grew 4.4% to $929.4 billion (KES119.9 billion), forcing the lender to increase provisions for loan defaults by 35% to $65.8 million (KES8.5 billion). The Central Bank requires Kenyan banks to set aside funds to cover loans where borrowers fail to pay principal or interest for 90 days.

“We are proud that Equity Group has a sufficient cushion on its key balance sheet buffers being liquidity, capital and NPL coverage while at the same time, it continues to report above industry profitability metrics,’’ Mwangi said.