Three major Nigerian banks—GTCO, Access Holdings, and Fidelity Bank—are set to allocate a total of $244 million from their recent public offerings to bolster their IT infrastructure.
This move is part of their strategy to comply with the Central Bank of Nigeria’s (CBN) new recapitalization requirements.
The banks’ prospects reveal plans to strengthen their cybersecurity frameworks and acquire new software licenses, driven by a surge in electronic transactions and increasing instances of online fraud in Nigeria.
GTCO Plc is leading the pack, earmarking 26.6% of its expected $526 million in public offer proceeds—amounting to $129 million—for technology upgrades.
Access Holdings plans to invest $90 million, or 20% of its anticipated $451 million proceeds in IT infrastructure.
Fidelity Bank is dedicating 20% of its $125 million in proceeds, approximately $25 million, to similar initiatives, with a focus on enhanced cybersecurity solutions, data analytics, and cloud services.
GTCO’s detailed plans include spending $92 million on its core banking application and $20 million on information security and fraud prevention software.
It will allocate another $8 million on upgrading digital channels such as mobile and internet banking and $10 million on enterprise management solutions.
These upgrades are slated for completion within 12 to 24 months.
Access Holdings intends to invest $54 million, representing 12% of its offer proceeds, in network infrastructure and $36 million in cybersecurity over 36 months.
Fidelity Bank’s allocation includes $12 million for cybersecurity, $10 million for software licenses and hardware, and $3 million for network infrastructure, with a projected completion timeline of 48 months.
Analysts highlight the urgency for Nigerian banks to enhance their IT infrastructure and cybersecurity. The significant impacts of a single security breach on the financial system underscore this necessity. Additionally, the shift towards electronic banking, particularly during periods of cash scarcity, has exposed the inadequacies in current IT systems.
“There is a clear need for an overhaul of IT infrastructure in many banks, driven by customer experiences and the increasing reliance on digital banking,” said Mr. Bello Muritala, founder of SalesUltimo, a SaaS technology company. “Investing a substantial portion of recapitalization funds in technology is a positive step, enhancing the digital banking experience for Nigerians.”
Muritala added that robust cybersecurity measures would help Nigerian banks mitigate fraud risks, boosting customer trust and investor confidence.
According to the Chief Executive Officer of Clane, a mobile payment company, Mr. Dipo Alabede, investing in technology and cybersecurity infrastructure is crucial for the banks as it would enable them to automate and streamline processes, reducing manual errors and improving service delivery.
He added that a robust IT infrastructure supports advanced digital banking services, including mobile apps, online banking, and other digital payment solutions, which are essential for the banks to retain and attract customers.
“With the rise in the development and adoption of digital platforms, we should also expect a rise in cyber threats, including phishing attacks, ransomware, and data breaches; thus, investing in cybersecurity is imperative for the banks.
“Strengthening cybersecurity measures will help the banks to protect sensitive customer data, maintain trust, and comply with regulatory requirements,” Alabede said.
The banks have in recent times faced competition from fintechs, whose infrastructure is agile and are able to scale faster than the traditional banks. The likes of Opay, Palmpay, and Moniepoint, among others, are now controlling millions of customers that would automatically have been bank customers in the absence of the fintechs.
This is firing up the banks to invest more in technology. However, some industry analysts believe that with the exception of GTCO, which is spending 26.6% of its proceeds on technology, the 20% earmarked by the banks may not be enough for the IT infrastructure overhaul that the banks need considering the changing dynamics of the financial technology space, especially with the increasing deployment of artificial intelligence (AI) across sectors.
Meanwhile, all the banks have been projected to raise an estimated $2.616 billion at the end of the ongoing recapitalization exercise. Going by the planned investment in IT infrastructure from the offer proceeds by the three banks, which is an average of 20%, about $522 million of all the banks’ capital raise may end up in the IT sector.
Meanwhile, all the banks have been projected to raise an estimated $2.616 billion at the end of the ongoing recapitalization exercise. Going by the planned investment in IT infrastructure from the offer proceeds by the three banks, which is an average of 20%, about $522 million of all the banks’ capital raise may end up in the IT sector.
This is expected to translate to more revenue for tech giants like Amazon Web Services (AWS) and Microsoft Azure, which provide banks with cloud services. A number of local IT firms rendering services to the banks are also expected to benefit from this spending.
