Publications
Partners
Abuja - Nigeria's new central bank governor said on Monday he is in favour of easing restrictions on the foreign ownership of local banks, saying this could allow fresh capital and risk management expertise into the sector.
Lamido Sanusi, former managing director of Nigeria's First Bank, who was appointed central bank governor at the start of the month, said that limiting foreign ownership of Nigerian banks was "not a sustainable policy".
"We do need the capital to come in, we do need the skills on ... risk management and secondly at this time we may need to recapitalise banks. What you want to do is open up all the possibilities," he said in the capital Abuja.
The central bank currently has to approve the acquisition of more than 5% of a Nigerian bank by a foreign firm. Sanusi said his predecessor imposed an additional restriction that no foreign bank could own more than 10% of a Nigerian one.
He said he had no timeframe for altering the rules but said they were unnecessarily restrictive.
"The central bank does need to approve any takeover more than 5%, so frankly it is unnecessary to have a 10% restriction," he said on the sidelines of a summit of leaders from regional economic bloc ECOWAS.
Nigeria, Africa's second biggest economy and its most populous nation, is home to some of the continent's biggest banks. But the global downturn has taken its toll.
Risk management and disclosure levels have failed to keep pace with explosive balance sheet growth in the wake of a wave of consolidation in the sector four years ago, fuelling distrust between counterparties as the environment has deteriorated.
A reduction in foreign credit lines and higher risk provisioning for non-performing loans have also contributed to a tightening of liquidity in the system.
Analysts say that could weed out some weaker banks and prompt a second round of consolidation.
"It is not something we would rule out. If they want to do it through mergers and acquisitions, voluntary and market-driven, it is something we would encourage," Sanusi said.
He was quoted by the Financial Times as saying he envisaged Nigeria ending up with around 15 banks, down from 24 now.
Disclosure levels
International banks started leaving Nigeria after regulations were introduced under military rule in the 1970s giving the state 60% ownership. The system has since been liberalised but only Standard Chartered and Citigroup have re-established sizeable operations.
"Why wouldn't I be comfortable with a bank owned by a Barclays, or HSBC or China Construction Bank, who I know? For me it's a no brainer," Sanusi told the Financial Times.
"I do hope they will be interested, and I do hope they will understand that the economic fundamentals remain very strong."
With a population of 140 million people, Nigeria has long been seen as a huge potential market for retail banking and as a strategic base from which to launch regional operations.
But more than 90% of the population live on less than $2 a day, according to UN statistics, meaning the number of bankable clients is in reality much smaller.
The chief executive of Access Bank said last week that banking deposit growth had peaked and started to turn negative in recent months. He said there were around 23 million bank accounts in Nigeria, just one million of which accounted for around 80% of total deposits.
Sanusi, who built a strong reputation for corporate governance and conservative lending strategies at First Bank, repeated that he would encourage Nigeria's banks to improve disclosure levels and tighten supervision.
"We would work with the stock exchange to improve the disclosure requirements on all quoted companies, including banks, and would encourage banks strongly to do so," he said.
- Reuters
