In the first half (H1) of 2024, five Nigerian banks made a combined investment of N178.77 billion to upgrade their IT infrastructure in order to guarantee seamless operations.
The funds are intended to support the institutions’ cybersecurity initiatives.
Five banks—Zenith, Access, Wema, United Bank for Africa, and Guaranty Trust Holding Company (GTCO), the parent company of Guaranty Trust Bank (GTB)—showed a commitment to improving their digital capabilities in the wake of the recent wave of bank system upgrades, according to an examination of their financial statements.
One of the biggest banks’ key IT staff stated that a number of issues, such as cost, flexibility, and security, are driving banks to migrate.
He claims that Nigerians are searching for systems with more security due to the rise in financial institution hacking, which is why new systems are being implemented.
In terms of expenses, he mentioned that banks are also attempting to reduce the amount of money they spend on basic banking apps.
He pointed out that the majority of Nigeria’s leading banks use a certain Indian program, which costs them a significant amount of foreign exchange every year.
In the first half of 2024, the banks’ IT investments climbed by 203%, from N58.8 billion in 2023 to N178.77 billion.
Rough estimate of how N178.77 billion were spent on IT by five Nigerian banks
With N111.24 billion invested in its IT infrastructure, Access Bank surpassed all other banks as the largest IT spender. This is a 264.55 percent increase over the N30.47 billion it spent in 2023.
Following that is Guaranty Trust Bank. In the first half of 2024, the bank reported spending N36.60 billion on IT-related expenditures, up 115.12% from N17.02 billion in the same time in 2023.
After investing N8.67 billion in IT in the first half of 2023, Zenith Bank increased their investment by 166.54 percent to N23.10 billion for technological advancements in H1 2024.
IT spending at United Bank for Africa increased by 248.20 percent, from N1.93 billion in the first half of 2023 to N6.70 billion in the first half of 2024.
Comparatively speaking, Wema Bank spends less on alternative channels and IT initiatives. Spending by the bank came to N1.13 billion, up 59.03 percent from N708 million during the same time previous year.
Information Technology expenditures to improve banks’ cybersecurity
Nigerian banks are taking a number of steps to improve their operations and safeguard depositor money. In light of recent instances of hacking, fraud, cyber theft, and consumer data breach, this has become essential.
Nigerian bank clients lost N59.33 billion to fraud between 2019 and 2023, with N10 billion lost in 2023 alone. Over 80,658 consumers fell victim to scams in 2023, which is a little drop from the 84,130 that occurred in 2022.
In their offer prospectus after the bank recapitalization exercise, some financial institutions stated that they would use a total of $1.20 billion (N222 billion) of the money they raised for technology investments and strengthening their cybersecurity defences in an effort to counteract the negative trend.
According to the banks’ offering paperwork, GTCO allocated the largest sum for technological investment. GTCO allocated N98.50 billion (26.6%) of the net offer proceeds for technological infrastructure enhancements, using the proceeds from its nine billion ordinary shares of 50 each at N44.50 per share with the goal of raising around N400.50 billion.
Information security and fraud prevention and detection software will receive N15 billion (4.1%) of the net proceeds, while the majority of the funds will be used for “Core banking application implementation, associated hardware infrastructure, network architecture, and ancillary costs related to optimisation of data centre/disaster recovery centre,” according to the statement.
Access Holdings plans to invest a total of N68.62 billion in IT, including N41.17 billion for network infrastructure, N27.48 billion for cybersecurity capabilities, and 20% of the net proceeds from its rights sale (N343.09 billion) for IT infrastructure development and improvements.
About 20% (N19.85 billion) of Zenith Bank’s N99.27 billion in net profits would go toward IT investments. Computer gear and servers will cost N8.93 billion, software licenses, registration, and network infrastructure improvements will cost N3.97 billion apiece, and cybersecurity architecture and software would cost N2.98 billion.
Fidelity Bank intends to spend around N19.01 billion on IT infrastructure, or 20% of the N127 billion in net proceeds from its IPO. According to a breakdown, the bank would spend N9.03 billion on cybersecurity skills, N7.60 billion on hardware and software licenses, and N2.38 billion on network infrastructure.
Out of the top five banks, FCMB Group intends to make the least investment in IT infrastructure. For technology, the bank set aside N16.22 billion, or 15% of net profits. N5.23 billion will be used to invest in cybersecurity capabilities, while N11 billion will be used to update its IT infrastructure.
Ten commercial banks invested N81.92 billion in IT and communication services in the first half of 2022.
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