J.P. Morgan, Absa see Nigeria opportunity as foreign banks exit Africa

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Read History Go to My Account Log Out Enhanced by Google Africa J.P. Morgan, Absa see Nigeria opportunity as foreign banks exit Africa International and pan-African banks are deepening their push into Nigeria’s corporate and investment banking market, with J.P. Morgan planning a

Listen to this article Share International and pan-African banks are deepening their push into Nigeria’s corporate and investment banking market, with J.P. Morgan planning a merchant bank and South Africa’s Absa Group considering a similar move.

The plans come as some European lenders reduce their exposure to African markets, while regional banking groups expand to capture opportunities in trade finance, corporate lending and capital markets.

Standard Bank, Africa’s largest lender by assets, is also seeking to double its West African business over the next four years, reflecting growing competition among regional and international banks for corporate and investment banking opportunities across the continent.

The renewed interest in Nigeria coincides with improving foreign exchange reserves, strong equity-market returns and more favourable sovereign credit outlooks, although inflation, currency volatility and high financing costs remain challenges.

J.P. Morgan, the world’s biggest bank by market capitalisation, plans to commence merchant banking operations in Africa’s third-largest economy before the end of the year, subject to regulatory approval.

Dapo Olagunji, the bank’s managing director for West Africa, announced the plans at the Nigeria–Asia Financial Connectivity Dialogue in Singapore last week.

The proposed operation would deepen the US banking giant’s existing presence in Nigeria, where it serves clients through its established businesses. J.P. Morgan has more than $4.1 trillion in assets and a significant international corporate and investment banking franchise.

The planned expansion reflects a broader effort by international lenders to strengthen their access to African companies, investors and financial markets.

Absa Group is considering converting its existing Nigerian representative office into a licensed merchant bank as it seeks to diversify earnings across markets and business lines.

Kenny Fihla, the South African lender’s CEO, disclosed the plan in August, saying the group was evaluating whether to retain its representative office or pursue a merchant banking licence.

“In Nigeria, we are evaluating whether we should stay with a representative office or whether we should be exploring other alternatives, including a merchant banking licence,” Fihla said in a Bloomberg interview. “That work is under way, and at the right time we will communicate what route we will be following.”

The proposed move comes as Absa seeks to reduce its reliance on a handful of markets. South Africa, Kenya and Ghana together accounted for more than 80 percent of the group’s profit in the first half of 2026, leaving it exposed to economic shocks in those economies.

“The dependence on two or three big markets is fine if you’ve got tailwinds, but as soon as you experience some headwinds, you are vulnerable to massive shocks,” Fihla said.

He said the group’s priority was to “diversify our revenue streams, both in terms of geographies, in terms of business lines, but also in terms of client segments.”

Nigeria offers Absa an opportunity to expand its wholesale banking business in West Africa, where it already has an established presence in Ghana.

A merchant banking licence would provide a different regulatory platform for serving corporate clients and participating in financing and capital-markets transactions.

Ayodeji Ebo, chief executive officer of MDU Capital, said the interest from foreign banks reflected the opportunities emerging in Nigeria despite the economic challenges businesses have faced in recent years.

“Nigeria’s economy is becoming a major attraction for businesses. Despite the instability and other challenges that have constrained businesses in the past, foreign banks are increasingly recognising the opportunities in a market that is becoming more stable and opening up,” Ebo said.

He said the proposed expansions could introduce greater competition and encourage local lenders to improve their products and services.

“The conversion of representative offices into fully fledged banks will also mean greater competition for existing lenders,” he said. “Local banks will have to brace themselves for more competition.”

Ebo added that international lenders could introduce products that are not widely available in Nigeria, while domestic banks could learn from their expertise and potentially collaborate with them.

Entering Nigeria at full capacity would put the foreign banks against well-established rivals. Fellow South African institutions Standard Bank Group and FirstRand already operate there, as do major Nigerian lenders including Access Holdings, Zenith Bank and First Bank.

According to Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co, the country’s returns and improving investment outlook could attract more international lenders, including banks from the Middle East.

However, he said foreign institutions needed to understand the country’s risk profile before committing capital. Representative offices can provide an initial foothold for assessing a market before a bank seeks approval for a more substantial local operation.

First Abu Dhabi Bank (FAB), the United Arab Emirates’ largest bank, announced plans in February to open a representative office in Lagos, marking its planned first physical presence in sub-Saharan Africa and 22nd operating country globally

Nigeria’s improving external position and strong equity-market performance are providing a more favourable backdrop for foreign banks considering a deeper presence in the country.

The statement said the country’s investment landscape in 2026 was being shaped by structural reforms, including fuel subsidy removal and foreign-exchange market liberalisation.

“There is broad agreement among economists and policy analysts that the Nigerian investment landscape in 2026 is defined by the outcomes of ‘painful but necessary’ structural reforms initiated by President Bola Tinubu at the start of his administration,” the statement said. It added that early 2026 indicators suggested a “fragile stabilisation” following the macroeconomic volatility triggered by the reforms.

External liquidity has also strengthened. The Central Bank of Nigeria reported that foreign-exchange reserves reached $50.45 billion in February, a 13-year high at the time. By October 8, reserves had risen to $55 billion, an 18-year high, providing a larger buffer against external shocks.

Nigeria’s stock market has also delivered strong returns to investors. The market recorded a 74.7 percent year-to-date return in US dollar terms as of October 6, the highest in Africa, according to data from African Markets.

The country also improved its position in a 2026 Bloomberg Economics Investment Risk-O-Meter, rising four places to rank as Africa’s eighth-most-investable market, ahead of Rwanda, Tanzania, Kenya and Namibia.

Nigeria has also received more favourable assessments from international rating agencies. Moody’s Ratings revised the country’s sovereign outlook to positive from stable in August 2026 while affirming its B3 rating.

Fitch Ratings followed on October 9, revising its outlook to positive while affirming its B rating.

S&P Global Ratings upgraded the nation’s sovereign rating to B from B- in May, although it retained a stable outlook.

These indicators signal that Nigeria’s investment appeal is improving, although risks remain.

Inflation, currency volatility, regulatory requirements and the cost of doing business will continue to influence foreign lenders’ decisions on whether to move from representative offices to licensed banking operations.

The expansion plans come as several European banking groups have withdrawn from or reduced their exposure to parts of Africa over the past decade.

Barclays, BNP Paribas, Crédit Agricole, Groupe BPCE, Société Générale and Standard Chartered are among the lenders that have scaled back operations in some African markets, reflecting changing strategic priorities and capital considerations.

However, the retreat has not been uniform. Some international lenders continue to pursue opportunities, while African banking groups have acquired businesses previously owned by foreign institutions.

A Lagos-based investment banking analyst said Absa’s potential expansion into Nigeria was not unexpected, given the group’s existing presence in Ghana and its broader African ambitions. The analyst also pointed to J.P. Morgan’s established relationship with Nigeria, including its role in managing the country’s foreign reserves, as a factor that could support a deeper local presence.

The analyst said Nigeria’s improving economic indicators and the returns available in its markets could attract more international lenders, including banks from the Middle East. However, foreign banks would still need to assess the risks before committing capital.

For Nigerian banks, the entry of additional international lenders could intensify competition for large corporate clients, cross-border transactions and international investment flows. It could also create opportunities for partnerships, knowledge-sharing and access to global financial networks.

Standard Bank’s expansion ambition adds to that competitive pressure. The Johannesburg-based lender already operates in Nigeria through Stanbic IBTC and is targeting opportunities in Nigeria, Ghana and Côte d’Ivoire as it seeks to grow its West African business. Its strategy centres on expanding its existing operations rather than entering Nigeria for the first time.

The broader contest is therefore not simply about which banks enter new markets, but which institutions can capture corporate clients, finance trade and infrastructure, and connect African businesses to international capital.

Olubunmi said the international banks’ entry could benefit the wider economy by introducing products and expertise while pushing domestic lenders to improve their services.

“Competition will certainly become stronger. International companies entering Nigeria may naturally want to bank with institutions such as J.P. Morgan, given their global reach. But competition can encourage local banks to innovate, improve their services and strengthen their capabilities.”