â¢ Why 234 branches and 649 ATMs were closed last year
â¢ Waste of decommissioned goods Lagos, other cities
There are indications that Nigerian banks are rapidly shrinking office space in major cities as they shift their administrative functions to high-tech operations.
The Guardian has found that with the increase in the number of employees working from home in the wake of the COVID-19 pandemic, banks are exploring technology options that will limit crowds in their rooms and reduce overhead on costs. annual real estate.
Although the square footage of abandoned office space by banks remains to be determined, reports have revealed that before the pandemic, the space occupied by commercial offices in 2019 exceeded 20,100 square meters.
But an International Monetary Fund (IMF) report last week found that Nigerian banks closed 234 branches and 649 automated teller machines (ABMs) in 2020, leading to a drop in the country’s financial access score (FAS). to 4.44 last year compared to 4.78 in 2019.
The global financial body revealed this in its 2021 Trends and Developments Financial Access Survey (FAS). The IMF is known to use two FAS indicators to monitor target 8.10 of the 2030 Sustainable Development Goals (SDGs), which aims to increase the capacity of domestic financial institutions to promote access to banking and financial services.
The number of commercial bank branches per 100,000 adults and the number of ATMs per 100,000 adults are the two commonly used FAS indicators.
According to the details of the report, Nigeria has experienced reductions in these two crucial FAS indicators as well as 12 other FAS indicators out of a total of 64 used.
The financial body said the cuts were due to a drop in the number of commercial bank branches in Nigeria from 5,392 in 2019 to 5,158 in 2020.
Likewise, the decline in the number of bank branches led to a drop in the number of ATMs in Nigeria by 649, leading to an average of 18,810 ATMs in 2020 compared to 19,459 in 2019. This also drove the score of the country’s financial access to 17.19. in 2020 against 16.14 in 2019 in terms of the number of vending machines per 100,000 adults.
Amid other economic shocks, the devastating effects of the pandemic led banks in Nigeria to temporarily or permanently close their branches as the virus forced people to stay indoors and adopt remote role models.
The rapid cuts in bank branches and ATMs are also due to the increasing use of digital and mobile banking solutions.
The annual instant payment statistics for 2020 released by the Nigerian Inter-Bank Settlement System (NIBSS) show that mobile transactions in Nigeria (mobile and USSD) increased in 2020.
These payments grew by 82.6% for a transaction value of 1.69 billion compared to 928.86 million recorded the previous year.
The NIBSS Point of Sale (POS) usage statistics also puts the POS transaction volume for 2020 at 77 million, an increase of almost 40% from the 46 million transactions recorded for 2019.
Basically, Nigerians are moving rapidly towards more contactless and digital modes of transaction, which is weighing heavily on traditional banks. One of its effects is the decrease in the number of bank branches and ATMs across the country.
The Guardian concluded that with the new normal and with banks joining the global change that has permanently changed the way bankers work, it becomes clear that the 2,000 to 5,000 square meters of office space, sometimes over two or three floors, are no longer needed.
As more digital and personalized financial services continue to emerge, more people will have less need to visit physical branches. Thus, there could be a continued decline in the number of ATMs.
The new development has prompted banks to equip new operations centers with technologies, such as video conferencing and email, which they had historically been slow to adopt.
They are also adapting their desks with more recent advancements, such as distributed ledger, data analytics, and cloud computing, which all help them automate tasks that employees once handled manually.
Currently, outside of physical bank branches where savings are held, customers are encouraged to sign up for mobile banking and other models that enhance services. The ATM is now a must for most customers who withdraw specific amounts.
Specifically, professional real estate agents known as real estate experts and real estate experts have confirmed that some banks are still dismantling branches to optimize their portfolios, while a handful of them are also opening new locations for them. ATM centers to solve complex problems and provide digital solutions.
They said the downsizing of financial institutions had been a huge setback for the office market in Nigeria, which saw an increase in the vacancy rate. The rebound in Class A office buildings was still expected due to the sluggish economy and the COVID-19 pandemic.
A report from Ubosi Eleh and Company predicted that “the growth of commercial real estate will slow down or be called into question in 2021 and maybe another year or two in the future values ââor the speed of sales will be low “.
Guardian investigations have revealed that currently disused branches adorn major cities, especially Lagos, Abuja, Kano, Borno and Port Harcourt. Insecurity in parts of the country has also prompted some banks to abandon their branches.
It has further been learned that the reduction in office space usually occurs slowly, as many leases last ten years or even longer and early termination of agreements can result in high compensation payments if buildings are not let.
The outgoing chairman of the Royal Institution of Chartered Surveyors (RICS), Mr Gbenga Ismail, told the Guardian that the change began years ago when the Planning Act restricted banks to 1,000 mÂ² , which put an end to the voracious expansion of branches.
âIt has been made worse by technology and branch banking. A bank can now operate on less than 10mÂ². The implication of all of this is that the demand for bank specific real estate has declined and has impacted non-urban locations and rural-urban areas.
âBetween 2000 and 2007, land prices increased due to the expansion of banks and those who owned properties or land with bank specifications reached gold. Today there are no renewals, expansions and purchases. There is now an overabundance of bank branches looking for new takers, âhe said.
Ubosi Managing Partner, Eleh and Company, Mr. Chudi Ubosi, said: âIndeed, banks have reduced the number of new offices and branches they are opening. Its impact on real estate is reflected in the number of bank branch buildings currently vacant.
âMany banks no longer need so much space and even so much staff. Technology is leading to a major rationalization of space and manpower requirements. When you see a large 400m2 / 500m2 bank branch, they are probably only using 40% of the space.
âThe rest is dedicated to storage or left vacant for expansion or future needs. The reason they do this is because for security reasons most banks cannot share space with other businesses, so they prefer to be on their own.
Ubosi, who was the former president of the Africa region of the International Real Estate Federation (FIABCI), said the vacancies had no impact on prices. âRental and capital values ââhave maintained their ascent or stability. I believe that over time the banks will find use in the structures that are currently vacant. Many would be sold to interested parties. There are some that, for strategic reasons, would not be sold and kept for future use, âsaid Ubosi.
The real estate expert and appraiser said some banks may donate or donate certain disused branches to states, other levels of government and ministries to provide social services as part of their corporate social responsibility. .
Former President of the Faculty of Real Estate Agencies of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr. Sam Eboigbe, noted that there is always a boom in the real estate sector when expanding the network of banks focused on acquiring locations for banks and other related purposes.
âConversely, the sector will experience a certain level of vacuum due to the decision of certain banks to close certain offices and to stop the acquisition of new office space.
âMore so, as the structure of these properties has changed significantly, it becomes difficult to initiate and close deals, rentals and rentals of such properties that have been vacated,â Eboigbe said.
According to him, the situation is made worse as there is a glut in the commercial real estate industry due to the global acceptance of the work from home culture and lifestyles. “The properties vacated by the banks will consequently increase the volume of vacancies in the office buildings of the real estate sector.”
Likewise, Eboigbe said that the introduction of ATMs, online banking and many other digital innovations have really brought about a revolution that it is now quite certain that there will continue to be a systematic reduction in the cost of banking. amount of physical space that banks will need.
âIt is certain that the deployment of technology by banks in their operations has continued to discourage the massive physical presence of customers on banking sites.
âIt means that the desire or demand for physical space for expansion will be eroded. And in this arrangement, it is obvious that the interest of the banks in renewals subsequent to the expiration of their mandate is doubtful, âhe added.