Nigeria: Consolidation in the banking sector

The bail-out of Nigerian banks in 2009 may lead to a consolidation in the country's fractured banking landscape, as the Central Bank (CBN) talks about liquidating some of the banks, and others are taken over by rivals.

Consolidation was a goal of the CBN before the crisis.In mid-2009, there were 24 banks operating in Nigeria, and the sector accounted for 60% of the exchange's market cap. The CBN discussed bringing the number of banks down to 15, as problems resulting from bad loans deliberately granted to cronies became clear. In August and September the CBN recapitalised eight banks to the tune of 620bn naira (€3.2bn): Afribank, Finbank, Intercontinental, Oceanic, Union, Spring, Equitorial Trust and Bank PHB. The CEs of the banks were sacked for what the CBN's governor, Lamido Sanusi, called "poor corporate governance practices, lax credit administration processes and the absence or nonadherence to the bank's credit risk management practices."

Equitorial has repaid the bailout money in full, plus interest, but frustration at the slow progress made by the remaining banks led Gov. Sanusi to warn stakeholders at a meeting last week that liquidation may be an option. Stakeholders urged the CBN not to consider either liquidation or nationalisation, while some criticised the interest payments being asked of banks at the same time as they are urged to cut personnel costs. All bailed-out banks showed a net profit in Q1 2010, as better credit control and the recovery of risky loans enabled the banks to write back provisions. There have also been pay cuts. BusinessWorld Intelligence reports that Fidelity has finished a due diligence review and is to acquire an unnamed bailed-out bank, currently managed by an interim team appointed by the CBN. Ecobank seems to be interested in the same acquisition. The CBN is reportedly keen on the idea, as it moves forward the consolidation in the sector that could strengthen Nigeria's finance sector against shocks caused by bad loans.

Source: www.lesafriques.com