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Foreign players hovering over Nigerian banks, says Sanusi

By Nicholas Norbrook in Istanbul
Posted on Thursday, 8 October 2009 14:00

In the Know features an interview, opinion or analysis from the people making the news in Africa each week.

The clean-up of the Nigerian banking sector continued in early October as the Central Bank of Nigeria (CBN) bailed out four more banks, and sacked three of their chief executives, two months after doing the same to five other banks in August.* At the IMF/World Bank Annual meetings in Istanbul this week, Nicholas Norbrook asked the CBN Governor, Lamido Sanusi, what lies ahead for the country’s banks.

The Africa Report: Is the worst over for the Nigerian banking sector?

Lamido Sanusi: The first five banks [that had their CEOs fired in August 2009] covered the bulk of the problem. They were accounting for about 90% of the subsidised lending that the Central Bank was doing, and also the bulk of the margin loans. Their average non-performing loan ratios were about 40%.

Of the next five banks, there was only one that was systemically important. Together they accounted for less than half of the market share of the first five. Now we are trying to deal with the governance issues, so that when the banks start to grow again, we don’t see the same problems that happened before.

Are you rewriting the codes on corporate governance?

The reality is that the laws and the codes have always been in place. We’ve got to improve on them, for example we have got to look more closely at the role of boards, and enforce the requirements for independent directors, which has not been complied with. We have also got to enforce a code of conduct for regulators themselves, because it is important to ask questions about what went wrong.

How many banks will there be in Nigeria in five years’ time?

We’ll see. There might be more. We have got to recognise that very big banks tend not to serve small businesses. We have to look at the possibility of having smaller banks, which will look at either the regions or manufacturing or agriculture, and see whether with lower capitalisation we cannot have smaller institutions. But in terms of the large deposit-taking banks, I suspect that we are going to have somewhat less than the 24 we currently have. It depends what happens at the end of the process.

Have you had expressions of interest from South African or Chinese banks?

There have been expressions of interest from South African banks for a long time, they have continued, I am meeting a few of them here [IMF/World Bank meetings, Istanbul]. There have been expressions of interest from British banks.

We will get formal expressions of interest within the next few weeks. We have one or two formal letters but we have not asked for them. We do know that foreign banks are looking at the market, at the attractive valuations, at the potential of the Nigerian economy, and we have said that we will not preclude any foreign banks from owning Nigerian financial institutions.

* The banks bailed out in August were Afribank, Intercontinental Bank, Finbank, Oceanic Bank and Union Bank. Those bailed out on 2 October were Equitorial Trust Bank, Bank PHB, Spring Bank and Wema Bank.

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