Nigeria: Her New Recapitalised Banks Are Ripe For Foreign Capture

By

Elie Smith

eliesmith@yahoo.com

 

 

The Nigerian banking industry has nowadays emerged from her uncertain past to an illustrious storied present. The banking sector in Nigeria is one of her unsung success stories and manifest dividend of her blossoming democracy. Most often, whenever specialists of the country want to mention an industrial success, it is almost always the Telecommunications industry, courtesy mobile telephones. Nigerian specialists almost always don’t talk about the revolution that the Nigerian financial sector, led by her banking industry has undergone in the last eight years. To understand or catch a glimpse of the positive transformation that, the Nigerian banking sector has undergone, it is important to note that, before 2006, Nigeria had 89 banks.  But, after the banking reforms that were carried out by the chair of the Nigerian Central Bank (CBN), Dr Chukwuma Soludo, Nigeria now has 25 strong reliable banks. And this has also demonstrated that, numbers or size doesn’t always matter, but what matters are qualities and competence. The reorganisation of the Nigerian Banking has positively influenced on the entire financial sector in the country. The revival of the finance sector of Nigeria is one of the successful reforms, carried out by the currently decried former Obasanjo administration. But as Nigerian banks have seen their capital base ballooned, so too have they excited the appetites of larger and stronger foreign banks.

 

The consequences of this has been that, the Nigerian financial sector is now attracting foreign investments and in doing so, realising one of the objective of the Nigerian government, not only to see the emergence of alternative magnets of foreign investments, but also kick start the diversification of an economy, that relies heavily on the oil sector. While the Nigerian government and some actors of the financial sector are beginning to smile at the focus that they have become in the global financial sector, some Nigerian Chief Executive Officers (CEO) of the recapitalised banks are not  happy. Why? For they know more than anyone that, the institutions that they are managing has become the envy of larger foreign banks. Hence, some have started agitating, by using the shield of nationalism or economic patriotism, in a bid to keep their banks, indigenous. On the surface, their agitations sounds brilliant, for who doesn’t love or want to hear about a hero, who is resisting attempts by foreigners to occupy the fatherland or takeaway some of her precious monuments or a patriot resisting the gluttonous desire of multinationals? But another look at the neo- nationalists that CEOs of some Nigerian banks have become, reveals that, their agitations has got nothing nationalistic nor are they worried about Nigerian shareholders and the fate that they will have, should their banks change flags.

 

What bothers them or makes them to gyrate is that, as foreign banks are beginning to show extravagant attention toward Nigerian banks, their juicy positions are in jeopardy. Hence they want Nigerian banks to remain indigenous, in order to preserve their positions and privileges as long as possible. It is a pity that, even the head of the Nigerian Central Bank, the man under whose tutelage, the erstwhile plethoric banking sector underwent the painful reforms, that has given birth to a buoyant banking system in Nigeria, was at some point, supporting those who are against foreign takeover of Nigerian banks. The reality is that, Nigeria needs foreign investments and everything must be done to open up the Nigerian economy to foreign investors. No sector should be allowed to have sacred cow status and thus barring or controlling foreign takeover whenever they are concern. Furthermore, another reality is that, whatever the agitations and manoeuvrings, there is no hiding place for Nigerian banks. For as they start carrying out road-shows or beginning listing in secondary markets in Western countries and also start attaching themselves to the global financial grid, they are increasing their exposure.

 

There are only three ways Nigerian banks can pretend to remain indigenous: by merging to create a big strong Nigerian bank, look regionally by buying banks in other African countries and also expand nationally and regionally. Those three options carry with them their own risk. But the greatest risk, (if it could be considered as risk) is that, if Nigerian banks that wants to buy other banks within the region, should also be prepared to be subject of the same transaction. In the whole scenario, those who should be happy are Nigerian shareholders, for they now have a rare opportunity to reap heavy dividends. And it is a welcome development. The other good news is that, some Nigerian Banks such: as Zenith, UBA, Guarantee Trust Bank and Union Bank have started expanding regionally, but as already mentioned, their expansion increase their visibility on the radar of much more stronger global banks. It is good to grow, but growing up comes with her own share of challenges. All in all, the growth of Nigerian banks is best for the Nigerian economy, for it might tend out to be cornerstone of the long sort after