|
These days, the buzz words on the financial pages of Nigerian newspapers and on the lips of many bankers are consolidation and merger. Those words are beginning to echo around the financial markets in London and New York as Nigerian banks begin to woo potential investors to fund them.
To many people, Nigeria and credible banking are strange-bedfellows given the extent to which the country's reputation was damaged by the advance fee fraud, commonly known as 419. So much so that most foreign governments regularly warn their citizens and businesses to desist from any dealing with Nigeria or its banks.
Faced with pressure from foreign agencies, the Olusegun Obasanjo-led government is introducing some reforms: These include the appointment of a fraud-czar and granting the country's Central Bank greater freedom to sanitise the sector.
The recent appointments of Prof Charles Soludo as the governor of the bank has equally won commendations from many in the financial sector.
Prof Soludo, a seasoned banker and academic, admitted that the Nigerian banking system today is fragile and marginal. His vision is a banking system that is part of the global change, and which is strong, competitive and reliable.
"We want a banking system which depositors can trust and investors can rely upon," he says."Evolving such a banking system is a collective responsibility of all agents in the Nigerian economy."
He adds that strengthening and consolidating the banking system will constitute the first phase of the the reform, with the second phase addressing the issues of diversification, including programmes to encourage the emergence of regional and unit-specialised banks.
The inability of Nigerian banks to voluntary embark on consolidation in line with world-wide trend has necessitated the need to consider the adoption of appropriate legal and supervisory frameworks, claims Prof Soludo.
In addition, the Central Bank is introducing a comprehensive incentive package to facilitate mergers and acquisition in the industry as a crisis resolution option and to promote soundness, stability and enhanced efficiency of the system.
Many believe these new measures are long overdue. The Nigerian banking system, they say, is very marginal in relative to its potentials and in comparison to other emerging economies.
Many banks are family-owned and exist only because of their close connections to Nigeria's political elite. Some of these banks are barely surviving and have been losing money their depositors saved with them.
In 2003 for example, the Nigerian footballer, Jay-Jay Okocha, lost about a million pounds in the collapse of a bank owned by the family of a prominent Nigerian politician.
Prof Soludo wants to see more banks offering the right services to ordinary depositors, which in turn will help stabilise the lending environment in one of Africa's biggest economies.
Nigeria currently has 89 banks with many having capital base of less than US$10 million and about 3,300 branches. The South African bank, Absa, for instance, has lager assets than all Nigerian banks put together.
To kick-start these reforms, the Central Bank has stipulated that any bank that want to retain its license to operate must have a minimum deposit of US$190 million by this December.
Merger talks between banks and efforts to attract potential foreign investors have led to a feverish activities in and outside the Nigerian Stock Exchange.
The New York-based Emerging Markets Management, the London-based Sisu Capital and Arvo Master Fund are some of the prominent overseas hedge-funds now investing in Nigerian banks.
More than 60 banks have already formed various merger groups, while the rest have already reached or surpassed the US$190million capital base stipulation.
Analysts believe the merger and acquisition drives will not only lift the banking sector but that it will also rejuvenate Nigeria's stagnant economy and provide solid proof to potential investors at home and abroad that the country is a healthy place to do business.
But they also fear that there are rooms for abuses, which need looking into.
There are suggestion that money looted from the Nigerian treasury by past military and civilian leaders are being re-invested in the emerging banks.
Experts warn that it is equally necessary for the Central Bank and the Nigerian government to avoid making the country a save haven for terrorist and drug money.
"In the banking sector, we all know what is happening,"points out Mr Bisi Otegbeye, the managing director of Regency Insurance Plc. "Two years ago, there are recklessness, money laundering, round-tripping and many other abuses. People were just doubling money and there was no real growth in the economy. Banks were not lending money long-term, so capacity of industries did not expand."
To counter these abuses, the Central Bank wants to see the establishment of an inter-agency committee that will co-ordinate anti-money laundering activities in the country. The bank is also reviewing its guidelines in order to combat some of the short-comings of the present reforms.
Mr Ignatius Imala, its head of banking supervision, says that the most important elements in detecting money-laundering or terrorist-related wires are having complete and meaningful information on the originator or transaction and recipient of funds.
"The Central Bank will review its guidelines to address this aspect and ensure strict compliance by financial institutions," he says.
editor@thenewblackmagazine.com
Nigerian Banks Emrace Reform
Send to a friend |
View/Hide Comments (4) |
Print
|