✕ CLOSE Online Special City News Entrepreneurship Environment Factcheck Everything Woman Home Front Islamic Forum Life Xtra Property Travel & Leisure Viewpoint Vox Pop Women In Business Art and Ideas Bookshelf Labour Law Letters

If foreign banks are entering Nigerian market…

No doubt the reorganisation of the Nigerian banks has positively influenced the entire financial sector. This vibrancy of Nigerian banking space also saw uncommon interest…

No doubt the reorganisation of the Nigerian banks has positively influenced the entire financial sector.

This vibrancy of Nigerian banking space also saw uncommon interest by foreign banks to invest substantially in Nigerian banks; some wanting to buy over completely some local banks. This saw Standard Bank of South Africa acquiring 51 percent equities in IBTC Chattered Bank Nigeria Plc on 24th September 2007. A new entity known as Stanbic IBTC Bank Plc was born.

Worried by that development, the immediate past Central Bank of Nigeria (CBN) Governor Professor Chukwuma Soludo announced a ceiling over the amount of equities a foreign bank could acquire in a local bank. He said the maximum shares a foreign interest can acquire in a local bank are 10 percent.

He based this policy, not necessarily within law, but within the notion that when the banking sector wasn’t doing well in Nigeria, foreigners stayed away but now that the Nigerian banks are strong, foreigners are coming to take over and he wouldn’t allow that.

While some economic analysts supported, others disagreed advancing reasons of global practices and completion. But local banks CEOs didn’t criticise Soludo’s sentiments because at least they wouldn’t be losing their CEO positions.

Nigerian laws permit, subject to approval from the CBN and the Securities & Exchange Commission, and minimum capital requirement though, foreign investors can acquire majority equity ownership in Nigerian banks.

But the new CBN governor, Lamido Sanusi who took over affairs on June 3rd this year thinks differently. He told Financial Times in his first major interview that, “I wouldn’t force any consolidation but I think it’s important to send out signals to the banks that may have difficulties that merging with stronger banks is certainly a very good possibility for saving themselves and saving their shareholders and their businesses.”

He said, “We would try to encourage foreign banks that are coming, not just with money, but within management and systems, to come in and acquire. But we will not force any bank or push any bank to merge. We are not going to have a bank of America-Merrill Lynch situation.”

He obviously, not thinking of ceiling on the equities foreigners could hold in local banks said, “In theory there is a limit to foreign ownership of banks. But the laws of Nigeria do not restrict that. The CBN obviously has the authority to approve. What we have today is that the CBN is not likely to support a foreign bank owning more than 10 percent of a top tier Nigerian bank.”

 No limit to the restrictions and the laws permit 100 percent takeover of a Nigerian bank by foreign bank, he explained.

Abdulrasheed Abubakar, Spring Bank Regional Director, North supported Sanusi’s renewed interest in foreign participation in local banks.

He said it was good because the market as it was in spite of the consolidation was not affecting the real sector.

He stated, “The banks are not really lending to the real sector. How much have the banks injected into the real sector? At least 50 percent of banks funds are either invested on stocks or in the oil and gas sector because of immediate profits. Even The big six banks are also busy chasing government accounts while our factories close shop.

“But when foreigners invest in our banks, they are likely to finance the real sector and our economy will be better for it.”

But Abubakar cautioned: “Foreign bank acquisition of local banks has to be controlled. A bank is not a cosmetic shop were you open and close shop at will. Once they come in, they should be willing to stay for a long time. And if they must pull out, it must be based on agreed terms to protect local investors and our economy.”

On why some foreign investors left and whether the environment was conducive for them to return he said, “Nigeria didn’t send the investors away. They took their monies and left because of the financial crisis back in their homes. But the CBN should encourage them to return but their participation in the local banks be moderated.”

Speaking in similar tone, Mr. Bimbo Asiru, head corporate affairs, Stanbic IBTC Bank told our correspondent on phone that it was good they returned to inject more money into the Nigerian economy.

He said, “What we are talking about is foreign direct investment (FDI) and it is good for our economy. Nigeria needs their monies and their expertise.”

Elie B. Smith, writing recently on Nigeria said, “Her new recapitalised banks are ripe for foreign capture” and asserted that, “In theory such strategy or strategies of protection are good, but in reality, I think they send wrong signals to investors. In my humble opinion, I think if Nigerian regulators allow foreign banks to takeover all Nigerian banks or the big banks, it might kick start foreign direct investments in other sectors of the Nigerian economy other than oil. For foreign investors, no matter what they may say officially, they have more confidence in banks they are used to than new ones.”

Another financial expert who wouldn’t want his name in print indicated that, whatever the agitations and manoeuvrings about foreign takeover of local banks, there was no hiding place for Nigerian banks.

According to him, as they started carrying out road-shows or listing in secondary markets in Western countries and were attaching themselves to the global financial hub, they were increasing their exposure and they could not run away from foreign interests.

One analyst holds that, “The regulators are not necessarily preventing foreign banks from operating in the country, rather they don’t want them to buy existing banks, and especially the big five banks. Most of the larger foreign banks are more interested in buying rather than obtaining a license and beginning operations. I think the regulators are learning from experience since we have foreign banks before now with very few branches, e.g. Citi Bank had less than 10 banks in just three cities in a country of about 140 million.”

So far, influence of foreign banks on Nigeria marketplace remains quantitatively small, but these banks provide important services to overseas companies –mostly affiliates or subsidiaries of multinationals. Opportunities for foreign bankers are largely, confined to structured trade finance, correspondence banking, offshore currency lending, project (asset-based) financing, custodial and cash management services, wealth management and, capital/money market services –including the placement of financial paper and depositary receipts.

Following this policy shift, some foreign financial institutions may have started re-considering their positions as new funds have started flowing into some selected Nigerian banks.

Recently, Intercontinental Bank Plc, confirmed receipt of €50m (US$66million) Developmental Credit Facility window for education and health sectors of the economy from the European Investment Bank (EIB).

Officials of the bank said some of the foreign banks that had last year withdrawn from Nigeria when they faced credit crunch in their home countries were coming back to re-invest in Nigerian economy through some selected Nigerian banks.

For now, Standard Chartered (UK) is the only wholly owned foreign bank in Nigeria. Banks with significant foreign shareholdings are: Stanbic IBTC Bank Nigeria (51 per cent owned by South Africa’s Standard Bank); Citibank Nigeria (Citibank, NA 75 per cent); Ecobank Nigeria (Togo-based Ecobank Transnational 71 per cent); United Bank for Africa (have various institutional investors via Global Depository Receipts traded on the New York Stock Exchange).

Information from Satnbic IBTC Bank indicated that, the Standard Bank Group merged its Nigerian operations and acquired 51 percent stakes in Stanbic Bank Nigeria with that of IBTC Chartered Bank PLC.  The merger, by way of the first ever tender offer in Nigeria and a $525 million FDI, the largest in Nigerian financial history, gave birth to Stanbic IBTC Bank Plc which became part of the Standard Bank Group.  The merger was officiated in August this year and legalised on the 24th of September 2007.

The Corporate and Investment banking offering includes global markets, project and structured finance, equities trading, corporate finance, global custody and a myriad of transactional and electronic banking solutions.  As part of Africa’s largest bank, it is able to give its clients access to expertise and on the ground presence across the globe, a vital service in the ever increasing global requirements of business.

Ecobank Nigeria Plc, is a pan African bank thus, it is not a full Nigerian bank in the true sense of the word.

Ecobank Transnational Inc. has 71 percent stakes in Ecobank Nigeria Plc, representing 15, 438, 635, 390 number of shareholdings amounting to N15,438,635,390 while Nigerian citizens and associations own the remaining 29 percent amounting to N6,215,591,536.

ETI commenced operations with its first subsidiary in Togo in March 1988. Today, the Ecobank Group is a full-service regional banking institution employing over 11,000 staff in over 600 branches and offices in 27 West, Central and Eastern  and Southern African countries in including Nigeria.

Nigerians can now earn US Dollars by acquiring premium domain names, most clients earn about $7,000 to $10,000, all paid in US Dollars. Click here to learn how to start.

%d bloggers like this: