FCMB to Expand Outside Nigeria on Oil Price Slump

First City Monument Bank (FCMB) said it plans to expand in at least two African countries as the plunge in oil prices reduces opportunities and income for banks operating in the continent’s biggest producer of the commodity.

“We have identified a key market in East Africa and another key market in West Africa,” Chief Financial Officer Patrick Iyamabo, told Bloomberg in an interview, declining to identify the nations as the information is confidential.

“While Nigeria is having trying times, the other markets can be doing great.”

The expansion, which is planned over the next three to five years, will enable FCMB to “smooth revenue and profit volatility,” he said. With a return on equity that compares or exceeds what you have in Nigeria, “greater value can be created for shareholders,” Iyamabo said. Africa’s biggest economy is reeling from a slump to near 12-year lows in the price of oil, a source of about two-thirds of government revenue and 90 per cent of foreign-currency earnings. The central bank’s efforts to all but fix the naira against the dollar for the past year by restricting foreign-currency trading by banks had caused a shortage of greenbacks, hampering companies from expanding or accessing imports.

“Because of the inability to access foreign exchange, the cash flow circle of businesses has been negatively impacted, which has implications on their abilities to pay their loans,’’ or do more transactions from which banks can earn fees and commissions, he said.

Shortcomings by the government to meet some of its obligations to contractors and the difficulties businesses have accessing dollars “means fewer transactions and increased risk for banks,’’ Iyamabo said.

Earnings for 2015 were “subdued’’ by a provision in the third quarter, while FCMB will limit loan growth this year to less than 10 per cent, Iyamabo said, adding that the lender is expecting the naira to be devalued.

FCMB will invest mainly in retail businesses, companies that are working on products that will substitute imports and industries focused on exports, he said.