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(HERALD) Nigeria to restrict foreign ownership of banks

Nigeria to restrict foreign ownership of banks

LAGOS. Owing to growing foreign interest in the Nigerian banking sector, the Central Bank of Nigeria (CBN) will soon roll out a framework that will restrict foreign ownership of banks in the country. Making this known to This Day in New York, the governor of CBN, Professor Chukwuma Soludo, said the framework would deter foreign institutions from taking over the top 10 banks in Nigeria , as they collectively account for 71 percent of the country’s banking system.

According to Prof Soludo: "The kind of interest being generated in Nigeria by foreign institutions now has raised an important issue. We are coming up with something pretty soon.

"We will work out a framework on the issue of the structure for our banks whereby we shall be a bit reluctant towards foreigners taking over our top 10 local banks which constitute about 71 percent of the banking sector.

"If you review the model by Singapore, which engineered an international financial centre, you have over 100 of these international banks operating there.

"But there is one rule that prevails: They are free to come and operate, they will get a licence to operate, but they are not allowed to try to take over any of three conglomerates (domestic banks).

"These are the three conglomerates that account for 70 percent of the entire banking sector," the governor disclosed. Prof Soludo said that the introduction of the policy regime would not amount to the restriction of inflow of foreign direct investment into the financial sector as foreign institutions wishing to do business in Nigeria will be free to apply for banking licences.

He said: "They can come into the country as long as they can bring N25 billion."

Prof Soludo noted that foreign investors preferring to invest in existing banks with the structures and branches in place could only do so in smaller banks that do not make up the top 10.

"You see this is a very strategic decision that a country has to make. We are still lucky because as we develop, we must be mindful of these scenarios. You cannot be indifferent to who ever owns a banking system because he that controls the systems, owns the economy."

Prof Soludo noted that there is fundamental difference between foreign-owned and domestic bank in terms of their behaviour.

"In terms of their intermediation and why they are there, the foreign banks and there are four of them in Nigeria, for all decisions they have to make a call to London and New York.

"Just take a look at them and see where their branches are located and the type of businesses they do. They just want to take minimal risks, take their returns and go and that is why it has become of strategic importance." The governor stated that Nigeria does not just merely want banks to be banks but wants institutions that will contribute to the growth and transformation of the economy. Making references to the capitalisation exercise and its impact on the financial sector, Prof Soludo said that in terms of capitalisation, the 25 banks that met the criteria are equal to the top three banks in South Africa.

He said developments in the sector have indeed been encouraging and there is still latitude for growth. He wondered why people are concerned about banks going to the market to raise more funds as Nigeria now accounts for five of the top 10 banks in Africa and is beginning to inch up. — This Day.

Labels: BANKING, NIGERIA

posted by MrK @ 6:00 AM