System upgrade: Zenith, GT, 3 other Nigerian banks spent N178.77bn on IT infrastructure in H1 2024

• Five Nigerian banks spent N178.77 billion on IT investments in H1 2024
• The investments are to bolster the banks’ cybersecurity efforts
• Banks contribute significantly to Nigeria’s GDP growth due to enhanced operations

Five Nigerian banks invested a collective N178.77 billion in enhancing their Information Technology (IT) infrastructure in the first half (H1) of 2024 to ensure smooth operations.

With the recent wave of bank system upgrades, an analysis of banks’ financial statements shows that five banks, including Zenith, Access, Wema, United Bank for African and Guaranty Trust Holding Company (GTCO), the parent company of Guaranty Trust Bank (GTB), demonstrated commitment to enhancing their digital capabilities.

The banks’ IT investments increased by 203 per cent from N58.8 billion recorded during the same period in 2023 to N178.77 billion in H1 2024.

How 5 Nigerian banks spent N178.77bn on IT

Access Bank took the lead as the highest spender on IT, investing N111.24 billion in its IT infrastructure, which is a 264.55 per cent increase from the N30.47 billion it spent in 2023.

Guaranty Trust Bank follows next. The bank reported a 115.12 per cent rise in IT-related expenses, amounting to N36.60 billion in the first half of 2024, up from N17.02 billion spent during the same period in 2023.

Within the period, Zenith Bank allocated N23.10 billion for technology improvements in H1 2024, which represents a 166.54 per cent increase compared to the N8.67 billion it invested in IT in the first half of 2023.

For United Bank for Africa, IT expenditure surged by 248.20 per cent, rising to N6.70 billion in the first half of 2024 from N1.93 billion in H1 2023.

Wema Bank trails behind in terms of the amount spent on IT investments and alternative channels. The bank’s spending reached N1.13 billion, which is a 59.03 per cent increase from N708 million in the corresponding period last year.

IT spending aimed at bolstering banks’ cybersecurity

Nigerian banks are adopting many measures to secure depositors’ funds and enhance their operations. This has become imperative given recent cases of hacking, fraud, cyber theft and compromise of customers’ data.

Between 2019 and 2023, Nigerian bank customers lost N59.33 billion to fraud as N10 billion was lost in 2023 alone. In 2023, over 80,658 customers were scammed, a marginal decrease from the 84,130 recorded in 2022.

To mitigate the ugly trend, some financial institutions, in their offer prospectus following bank recapitalisation exercise, announced plans to allocate a combined $1.20 billion (N222 billion) of the funds from their capital raise toward technological investments and bolstering their cybersecurity measures.

From the banks’ offering documents, GTCO budgeted the highest amount to be invested in technology. From the proceeds of its nine billion ordinary shares of 50 each at N44.50 per share with the intent to raise about N400.50 billion, GTCO earmarked N98.50 billion (26.6 per cent) of the net offer proceeds on technology infrastructure upgrades.

It said the majority of the funds would be spent on “Core banking application implementation, associated hardware infrastructure, network architecture and ancillary costs related to optimisation of data centre/disaster recovery centre,” while information security and fraud prevention and detection software will get N15 billion (4.1 per cent) of the net proceeds.

Access Holdings intends to spend a total of N68.62 billion on IT with 20 per cent of the net proceeds from its rights offer (N343.09 billion) to be invested in IT infrastructure upgrades and development, N41.17 billion will go into network infrastructure and N27.48bn in cybersecurity capabilities.

Zenith Bank intends to spend about 20 per cent (N19.85 billion) of the net proceeds of N99.27 billion on IT investments. The lender plans to spend N8.93 billion on computer hardware/servers, N3.97 billion each on software licences, registration and network infrastructure upgrades and another N2.98 billion on cybersecurity architecture/software.

Fidelity Bank plans to invest about N19.01 billion in IT infrastructure, which is about 20 per cent of the net proceeds from its offering of N127 billion. A breakdown shows the bank will invest N9.03 billion in cybersecurity capabilities, N7.60 billion in software licences and hardware and N2.38 billion as additional investment in its network infrastructure.

FCMB Group plans to invest the least in IT infrastructure of the top five banks. The bank budgeted N16.22 billion (15 per cent of the net proceeds) for technology. While N11 billion would go to upgrade its information technology infrastructure, N5.23 billion will be channelled towards investment in cybersecurity capabilities.

In the first half of 2022, 10 commercial banks spent N81.92 billion on communication and IT services.

Banks huge contributors to Nigeria’s GDP growth

It is unarguable that banks contribute significantly to Nigeria’s Gross Domestic Product (GDP). Recently, the National Bureau of Statistics (NBS) said Nigeria’s GDP grew by 3.19 per cent in real terms in the second quarter (Q2) of 2024.

In the GDP report, the NBS said the GDP growth rate is higher than the 2.51 per cent recorded in the same quarter of 2023 and the 2.98 per cent recorded in Q1 2024.

It said the Q2 2024 GDP performance was majorly driven by the services sector, which increased by 3.79 per cent and contributed 58.76 per cent to the total GDP.

Under the services sector, the banking sector contributed 16.36 per cent to Nigeria’s real GDP in Q2 2024, increasing from 2.98 per cent in Q1. The growth is not unconnected to the significant investments made by commercial banks in upgrading their IT systems.

Explainer: Bank System upgrade and why it has to done

Meanwhile, TheRadar reported that in recent weeks, some Nigerian banks have announced upgrades to their systems to allow for seamless and easy banking.

TheRadar explains what a bank system upgrade is and why it has to be done.