‘US bank failure will limit funding for Nigeria’s fintech startups’ – New Telegraph
Nigeria’s booming fintech sector may suffer from a drop in funding from foreign investors as a result of the recent collapse of two US lenders – Silicon Valley Bank (SVB) and Signature Bank, analysts at Financial Derivatives Company (FDC) Ltd. have said . In a report released over the weekend, the analysts stated: “Total value of fintech startup funding from Venture Capital jumped to $536.7 million in 2021 from $20.9 million in 2015 before falling to $507 million in 2022. “SVB is a major financier of technology startups and venture capital in the United States.
The collapse of the SVB & Signature bank crisis will squeeze and limit funding for fintech startups in Nigeria. Nigeria’s fintech space is likely to come under pressure.” The analysts also stated that as a result of the global banking turmoil, more than a quarter of emerging markets have been shut out of international bond markets “as investors take a ‘risk off’ approach to high-yield debt despite the ease of the global financial crisis.” The FDC analysts predicted that “emerging markets with unstable credit status will be the most challenged,” FDC predicted that “countries with limited access to international debt markets may be forced to turn to the International Monetary Fund (IMF), private market debt sales and foreign exchange. devaluations.”
New Telegraph reports that on March 10, Silicon Valley Bank (SVB) in California, which a few days earlier had experienced a run on its deposits, was taken over by the US Federal Deposit Insurance Company (FDIC). The lender’s collapse, which was the largest bank failure since the 2008 global financial crisis, was soon followed by the failure of another US bank, Signature Bank, while liquidity issues (ie withdrawal of customer deposits) affected several other US banks. Similarly, in Switzerland, banking giant Credit Suisse faced liquidity challenges and was bailed out by the Swiss National Bank, which then sold it at an agreed price of $3.25 billion (N1.48tn) to rival UBS. In a recent report, analysts at the research department of Coronation Merchant Bank said that if the current US and European banking crisis adversely affects global growth and results in oil prices falling below the level of $75.0/barrel assumed in Nigeria’s 2023 budget, it could have an indirect negative impact on the country. However, they stated that any indirect effect the crises would have on Nigeria’s economy “would take time, several months, to materialize.” As the analysts put it, “the US and European banking crisis are unlikely to have direct effects on the Nigerian banking system. We also believe that the Federal Government of Nigeria bonds will hardly be affected by this. However, there may be some indirect effects if the US and the European banking crisis negatively affects global growth and again causes oil prices to fall below the level of $75.0/barrel assumed in Nigeria’s 2023 budget. Such an indirect effect will take time, several months, to materialize.”
