Published: October 5, 2009
Lamido Sanusi, governor of the Central Bank of Nigeria, believes the country's economy is "turning the corner" and hopes the high-profile sackings of several banking bosses have increased transparency in the sector.
Speaking at a seminar organsied by Standard Bank to coincide with the annual IMF / World Bank meetings, Sanusi said the collapse of Lehman Brothers in the US in October 2008 had taught him certain lessons as a regulator – first, "never let a big bank fail", and second, "never let the CEOs get away with it".
Sanusi was speaking just days after the central bank recapitalised four more Nigerian banks at a cost of N200bn (US$1.4bn); Bank PHB, Equitorial Trust Bank, Spring Bank and Wema Bank. The managing and executive directors of PHB, Equitorial Trust and Spring Bank have been fired.
In August the central bank injected N400bn into Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank as well as sacking their executives directors, who have since been charged on counts including giving loans without adequate security and manipulating stock prices.
All 24 Nigerian banks have now undergone audits by the central bank.
What next for the bailed-out banks? Sanusi reiterated that the law places no limit on foreign ownership of domestic institutions, and said no efforts will be made to discourage foreign banks from taking over their Nigerian peers. He expects some to be the target of local M&A transactions.
Speaking at a press conference at the World Bank meetings, Mansur Muhtar, Nigeria’s finance minister, said government ownership would be considered as "an interim arrangement" depending on how long it takes to find buyers.
In terms of the banks' future structure, Sanusi confirmed that the central bank would now try to stop any bank having a market share of more than 20%, and that it was also investigating the possibility of having multi-tiered capital adequacy ratio requirements, meaning that big banks would need greater capital reserves.
Meanwhile, he hopes the changes in the country’s banking sector as a kick start for other shifts in national policy. "What we hope to do is use the banking reforms as the beginning of much wider reforms in the way things are done in the country and Africa," he said. "Beyond capitalisation, beyond leverage, beyond all the financials, at the heart of these reforms is the question of how do we do things as a country, how we need to change that."
Inflation fell from 13% in June to 11% in August and should be in single digits by the end of December, he said. Meanwhile, money market rates have fallen, exchange rates have stabilised and oil production is increasing. "We can safely say we are looking at an economy that is turning the corner," Sanusi added.