Alert Microfinance grows assets 20-fold as inflation reshapes Nigeria’s banking landscape

Alert Microfinance Bank has grown its total assets nearly 20-fold in three years to N50 billion, demonstrating how some lenders are capitalising on rising demand for credit despite operating in one of Nigeria’s toughest macroeconomic environments marked by high inflation, elevated interest rates and currency depreciation.

The lender’s parent group, Alert Group, now has total assets of about N120 billion, up from a significantly smaller base, as it accelerates expansion following the grant of a national microfinance banking licence by the Central Bank of Nigeria (CBN) to Alert Microfinance bank earlier this year.

Speaking in an interview with BusinessDay, on the bank’s growth trajectory, Olanrewaju Kazeem, Group Chief Executive Officer of Alert Group, said the rapid expansion was not accidental but the result of a carefully executed long-term strategy focused on financial inclusion and serving Nigeria’s underbanked population in anticipation to a regional growth to other African countries in the nearest future.

“The growth that you see in Alert Microfinance Bank and Alert Group as a whole is a deliberate plan to ensure that we are able to deliver quality service and also to extend our services to as many Nigerians as possible,” he said.

“What you have today in terms of total assets for the group is about N120 billion and for Alert Microfinance Bank is about N50 billion, coming from where we started about three years ago with about N2.5 billion.”

According to him, the bank’s expansion has been driven by an ambitious board-approved strategy aimed at taking financial services to underserved communities across Nigeria, where millions of people remain excluded from the formal financial system.

“The need for us to extend our services to other parts of the country where there is yearning for such services, particularly ensuring that we improve financial inclusion and help the underbanked and unbanked in Nigeria, is what is driving us,” he said.

He added that growing public confidence in the brand, coupled with the CBN’s approval of a national licence, has strengthened the institution’s ability to expand across the country.

“We have seen a lot of acceptance of the brand and extending our services to various parts of Nigeria has become very compelling.”

The bank’s expansion comes as Nigeria’s microfinance industry navigates a difficult operating environment characterised by persistently high inflation, elevated funding costs and increasing operating expenses.

The Group Chief Executive Officer said one of the biggest challenges confronting the sector is access to skilled human capital needed to execute growth strategies.

“The industry is still relatively young and getting quality personnel to oversee our plans and strategy remains very challenging,” he said.

Funding costs have also become significantly more expensive following the tight monetary policy stance, with the Monetary Policy Rate standing at 26.5 percent.

“In a system where the cost of funds, as dictated by the MPR, is about 26.5 percent, you can imagine the cost of funds that we use to do business. By the time you add the cost of doing business, prices are escalated and the cost of credit to customers becomes very high,” he said.

He explained that higher lending rates inevitably increase repayment pressure on borrowers, leading to elevated default risks.

“When you have a high cost of funds, what naturally happens is that the default rate may increase because the ability of customers to meet both principal and interest repayments becomes much more challenging.” Though Alert MFB has strategically managed to default risks with ddefault rate consistently below 4%. Doing this required special skill, attention and decispline.

Inflation has equally pushed up personnel costs as employees demand higher wages to cope with the rising cost of living.

According to him, the bank reviewed staff salaries four times last year and, in some cases, exceeded its annual budget to retain critical employees.

“Sometimes you have to go beyond your budget to retain certain categories of staff. It means that the plan for the year is distorted because of the macroeconomic challenges that exist.”

Beyond inflation and interest rates, he identified Nigeria’s sovereign risk profile as another factor increasing the cost of raising capital from international investors.

Foreign development finance institutions and other offshore investors, he said, often price equity and debt investments based on the country’s macroeconomic conditions, making funding significantly more expensive than in several other African markets.

The bank also cited multiple taxation as a persistent burden on operators, noting that banks frequently face numerous levies beyond corporate income tax from different government agencies.

Despite the challenges, the bank believes Nigeria’s macroeconomic reforms have also created significant opportunities for lenders.

The devaluation of the naira and rising inflation have increased the amount of working capital businesses require, driving stronger demand for loans.

“What naturally happens is that the cost of goods goes up. Therefore, for many customers to restock at their current level of business, they require more funds. Demand for credit naturally goes up, and that’s exactly what we are seeing in the system.”

He noted that businesses dependent on imported goods have been particularly affected by the liberalisation of the foreign exchange market.

“Moving from exchange rates of N500, N600 or even N800 to around N1,300 to buy the same goods means businesses need substantially more naira. Naturally, they demand more credit.”

The stronger appetite for loans has enabled the bank to deploy more funds into lending, supporting expansion of its loan portfolio and revenue growth despite the difficult operating environment.

The lender has also recorded robust deposit mobilisation as customers increasingly save through formal financial institutions.

“Our deposits have grown by more than 200 percent every year over the last two years. So we can also say that people are saving more at the moment,” he said.

For Alert Microfinance, the combination of rapid balance sheet expansion, rising loan demand and stronger deposit growth illustrates how lenders with the capacity to manage higher operating costs are positioning themselves to benefit from Nigeria’s evolving financial landscape, even as inflation continues to reshape the economics of banking. The Group CEO concluded that the ambitious growth plan is working as planned.