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Nigerias Economic Downturn: Business Lenders Complete Rethink

Published by Vanguard on Mon, 19 Oct 2020


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Amid ongoing global crises, Nigeria continues to face an economic crisis all of its own. World Bank reports from earlier this year claimed that the country was facing its worst economic slump in 30-40 years. Therefore, as can be imagined, businesses countrywide are having to pivot and re-establish themselves.
Games services such as online blackjack and other casino favourites may be thriving, but what about other Nigerian businesses

Banks Scramble for Survival

At this moment in time, Nigerian banks appear to be in what some media outlets are referring to as survival mode. This means that the biggest lenders in the country are having to completely rethink their fiscal strategies as they grapple with new losses.
Big lenders such as Guaranty Trust are set to diversify their running completely. Already, in light of big changes that have rocked the Nigerian economy in 2020, GT will move to a holding company by the end of 2021 – if reports are to be believed.
Access Bank Nigeria, meanwhile, is focusing on expansion as a model for survival. They are still pushing to extend into Mozambique and Guinea, having successfully branched out into Cameroon.
Nigerias economy has nosedived from a healthy GDP maintenance to -6% in Q1 of 2020 alone. Therefore, there’s no surprise that lending banks are building safety nets for the year to come. But where does this leave businesses reliant on their support

A New Age for Business Borrowing

Some commentators believe that digital lending may be the way forward for businesses growing in Nigeria. Amid even the rocky fiscal climate, the country may be in right now; there are still opportunities for business people and SMEs to claim quick funds through digital outlets.
This is, according to some sources, likely to be all the more appealing given that Nigerian lending laws are yet to update fully to accommodate the new digital standards. Regulation is in demand in Nigeria to cover digital money brokers as soon as possible. This is especially the case as loopholes in the law have seen some digital lenders avoid having to register with the state officially.
But where does this leave Nigerian businesses The idea of digital lending, particularly from overseas platforms or even from a cryptocurrency base, is likely to be very tempting. However, time is ticking for both the legal system and the financial system to catch up.

Back to the Banks

There is no clear path at present as to how Nigeria will pull itself out of its current financial state. Banks are manning the lifeboats to survive, and small businesses are having to get creative. With the law still unclear on digital lending, it may well be that more firms drift to app-based borrowing.
Or – by this time next year – will banks have pulled back enough faith and capital to help grow Nigeria’s economy once again We will have to wait and see.

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