Sanusi Lamido
The Central Bank of Nigeria (CBN) has said that the number of banks in the country may be reduced from 24 to 20 by mid this year, when the industry is expected to have consummated recapitalisation deals.
The CBN Deputy Governor, Financial System Stability, Mr. Kingsley Moghalu, who made the disclosure at the Salters Hall, Fore Street, East Central London yesterday explained that the reduction in the number of banks was informed by the fact that about four would likely be taken over through mergers and acquisitions.
“By mid of 2011, the banks will be taken. Twenty or 21 banks will remain after the reforms. We are not legislating any number but the way it appears now, about three or four banks will be swallowed up in mergers and acquisitions,” he said.
The deputy governor, who was responding to questions from prospective investors and stakeholders in the Nigerian $500 million Eurobond billed to be issued tomorrow, pointed out that at the beginning of the banking reforms, about 87 to 90 international and local financial institutions had expressed interest to invest in the rescued banks but that the number of interested buyers had since reduced to about 17.
The rescued banks include the eight that were bailed out last year by the CBN with N620 billion tier two capital and another two banks found lacking in capital or liquidity after the joint examinations of the banks last year. They are all fraught with two challenges – how to regain liquidity after losing over N1 trillion in assets and also how to recapitalise to meet CBN’s capital adequacy level.
Foregn and local investors including Standard Chartered Group, FirstRand, Capital Alliance Group, Habib Bank Pakistan, First City Monument Bank (FCMB), Access Bank, Fidelity Bank and First Bank had indicated interest in one or two of the banks namely: BankPHB, Union Bank, Afribank, Oceanic Bank, Spring Bank, Interconti-nental Bank and Finbank.
However, some industry stakeholders are pessimistic about the likely outcome of the negotiations which they said had dragged on for too long. There have also been concerns that with the exit of some of the prospective buyers, some of the banks may not get the core investors envisaged by the CBN.
But after AMCON bought about N2.2 trillion of the bad assets of 21 eligible banks last year, in exchange for about N1 trillion consideration bonds, thereby injecting fresh liquidity into the banks and cleaning up their books, there have been fresh optimism that many of the banks will be recapitalized before mid this year.
Moghalu assured the foreign investors that the recapitalisation would end soon and that the industry would be better off for it.
He explained that the reforms would result in the classification of Nigerian banks into commercial, merchant and specialised banks.
According to him, the commercial banks would be broken down into international banks, national banks and regional banks, adding that the specialized bank structure would see the banks operating as micro finance banks, Islamic banks or non-interest banks, among others.
The deputy governor pointed out that the change in banking model was aimed at removing the emphasis on banks from size and spread as was the case before the reforms.
“Banks that are big and want to remain big are free to be so as long as they meet the regulatory requirements,” he said.
He said at the end of the reforms, massive economic growth would be achieved in the nation.
The Minister of National Planning, Dr. Shamsudeen Usman, who also addressed the investors, faced a difficult task explaining the reason behind the massive draw-down on the nation’s external reserves and its current account.
The foreign investors, one after the other, asked for clearer explanations from the government functionaries for the rapid depletion of the country’s reserves in the space of about one year.
Usman explained that the draw-down was not occasioned by frivolities but by sound economic and developmental needs.
He explained that the funds were shared among the local, state and Federal Government and that the mandate for the release was for all tiers of government to direct the funds to revamp poor infrastructure.
“The funds were shared by the Federal, states and local governments and there was a formal understanding reached that all the tiers of government must direct the use of the money to improve critical infrastructure which include power, roads and others,” Usman told the investors.
He also hinted that most of the fund was also used to ensure foreign exchange stability in the country’s economy.
He explained that to ensure best practices in the management of the fund in the future, the government is putting a Sovereign Wealth Fund (SWF) together whose bill is before the National Assembly.
Describing the SWF, he said 60 per cent of the fund would be targeted at infrastructure development; 20 per cent would be for stabilisation of foreign exchange volatility, while 20 per cent would be saved for the future generation.
He however stressed that the fundamentals of the Nigerian economy are strong with increase in economic growth rates in the last five years, good crude oil prices and growing non-oil sector.
The Central Bank of Nigeria (CBN) has said that the number of banks in the country may be reduced from 24 to 20 by mid this year, when the industry is expected to have consummated recapitalisation deals.
The CBN Deputy Governor, Financial System Stability, Mr. Kingsley Moghalu, who made the disclosure at the Salters Hall, Fore Street, East Central London yesterday explained that the reduction in the number of banks was informed by the fact that about four would likely be taken over through mergers and acquisitions.
“By mid of 2011, the banks will be taken. Twenty or 21 banks will remain after the reforms. We are not legislating any number but the way it appears now, about three or four banks will be swallowed up in mergers and acquisitions,” he said.
The deputy governor, who was responding to questions from prospective investors and stakeholders in the Nigerian $500 million Eurobond billed to be issued tomorrow, pointed out that at the beginning of the banking reforms, about 87 to 90 international and local financial institutions had expressed interest to invest in the rescued banks but that the number of interested buyers had since reduced to about 17.
The rescued banks include the eight that were bailed out last year by the CBN with N620 billion tier two capital and another two banks found lacking in capital or liquidity after the joint examinations of the banks last year. They are all fraught with two challenges – how to regain liquidity after losing over N1 trillion in assets and also how to recapitalise to meet CBN’s capital adequacy level.
Foregn and local investors including Standard Chartered Group, FirstRand, Capital Alliance Group, Habib Bank Pakistan, First City Monument Bank (FCMB), Access Bank, Fidelity Bank and First Bank had indicated interest in one or two of the banks namely: BankPHB, Union Bank, Afribank, Oceanic Bank, Spring Bank, Interconti-nental Bank and Finbank.
However, some industry stakeholders are pessimistic about the likely outcome of the negotiations which they said had dragged on for too long. There have also been concerns that with the exit of some of the prospective buyers, some of the banks may not get the core investors envisaged by the CBN.
But after AMCON bought about N2.2 trillion of the bad assets of 21 eligible banks last year, in exchange for about N1 trillion consideration bonds, thereby injecting fresh liquidity into the banks and cleaning up their books, there have been fresh optimism that many of the banks will be recapitalized before mid this year.
Moghalu assured the foreign investors that the recapitalisation would end soon and that the industry would be better off for it.
He explained that the reforms would result in the classification of Nigerian banks into commercial, merchant and specialised banks.
According to him, the commercial banks would be broken down into international banks, national banks and regional banks, adding that the specialized bank structure would see the banks operating as micro finance banks, Islamic banks or non-interest banks, among others.
The deputy governor pointed out that the change in banking model was aimed at removing the emphasis on banks from size and spread as was the case before the reforms.
“Banks that are big and want to remain big are free to be so as long as they meet the regulatory requirements,” he said.
He said at the end of the reforms, massive economic growth would be achieved in the nation.
The Minister of National Planning, Dr. Shamsudeen Usman, who also addressed the investors, faced a difficult task explaining the reason behind the massive draw-down on the nation’s external reserves and its current account.
The foreign investors, one after the other, asked for clearer explanations from the government functionaries for the rapid depletion of the country’s reserves in the space of about one year.
Usman explained that the draw-down was not occasioned by frivolities but by sound economic and developmental needs.
He explained that the funds were shared among the local, state and Federal Government and that the mandate for the release was for all tiers of government to direct the funds to revamp poor infrastructure.
“The funds were shared by the Federal, states and local governments and there was a formal understanding reached that all the tiers of government must direct the use of the money to improve critical infrastructure which include power, roads and others,” Usman told the investors.
He also hinted that most of the fund was also used to ensure foreign exchange stability in the country’s economy.
He explained that to ensure best practices in the management of the fund in the future, the government is putting a Sovereign Wealth Fund (SWF) together whose bill is before the National Assembly.
Describing the SWF, he said 60 per cent of the fund would be targeted at infrastructure development; 20 per cent would be for stabilisation of foreign exchange volatility, while 20 per cent would be saved for the future generation.
He however stressed that the fundamentals of the Nigerian economy are strong with increase in economic growth rates in the last five years, good crude oil prices and growing non-oil sector.
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