Hurdles For Foreign Banks
The Central Bank of Nigeria (CBN) has set fresh hurdles for foreign banks desirous of merging with or acquiring any of the existing local banks in the country.Under the new regulation being considered, any foreign bank coming into the country to take a banking licence and wants to merge with or acquire any of the local banks must have operated in Nigeria for a minimum of five years and if a group of foreign institutions decides to invest in any of the local banks, the aggregate investment must not be more than 10 per cent of the latter’s total capital.
In a situation where a single foreign investor invests in a local bank, such investment may not exceed the holding of the largest Nigerian shareholder.Also, to qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a spread of two-thirds of the states of the federation. This, in a nutshell, means that the foreign bank must have branches in at least 24 out of the 36 states of the federation.
With this development, the two foreign banks in the country, Standard Chartered Bank and Nigeria International Bank – excluding Stanbic Bank which has since coalesced with IBTC Chartered Bank – are not qualified to acquire directly or through their parent company any bank in Nigeria.While Standard Chartered Bank and Nigeria International Bank, which opened shop in Nigeria in 1999 and 1983, have scaled the first hurdle (having operated in Nigeria for a minimum of five years), they, however, do not have the requisite number of branches. Standard Chartered Bank has just 12 branches, while Nigeria International Bank has 13.
The banking watchdog would soon launch a new framework on foreign ownership of Nigerian banks.Soludo who spoke at the “Nigeria Meets the World Summit” organised by THISDAY, had hinted that owing to growing foreign interest in the Nigerian banking sector, the apex bank would soon roll out a framework that would restrict foreign ownership of banks in the country.“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 ten local banks which constitute about 71 per cent of the banking sector,”
He said 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 ten.Justifying the need to roll out a new framework at the 11th edition of a seminar organised for finance correspondents and business editors in Enugu last November, Soludo noted that foreign ownership of local banks had drawn back Nigeria’s economic development.He explained that the decision of the CBN was premised on what it had observed in terms of the relationship between ownership and control of the nation’s financial system and economic development.
He clarified the issue by saying that we had repeatedly said we are limiting foreign ownership in banks. We are currently working on the policy and before the end of the year, we will come up with a clear policy. It does not have much to do with corporate governance but has to do with the empirical evidence about the relationship between ownership and control of the financial system and economic development of a nation especially at the level of our own economic development,” he had said.
He explained then that the Central Bank was not preventing foreign banks from investing in the economy, stressing that what the regulatory authorities would not allow was the acquisition of any local bank.“Foreign banks are allowed to come into Nigeria and set up shops. If they meet the N25 billion requirement, we will give them a fresh licence but if they want to take over some of the existing ones, we will be reluctant to do so,” he had said.
In a situation where a single foreign investor invests in a local bank, such investment may not exceed the holding of the largest Nigerian shareholder.Also, to qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a spread of two-thirds of the states of the federation. This, in a nutshell, means that the foreign bank must have branches in at least 24 out of the 36 states of the federation.
With this development, the two foreign banks in the country, Standard Chartered Bank and Nigeria International Bank – excluding Stanbic Bank which has since coalesced with IBTC Chartered Bank – are not qualified to acquire directly or through their parent company any bank in Nigeria.While Standard Chartered Bank and Nigeria International Bank, which opened shop in Nigeria in 1999 and 1983, have scaled the first hurdle (having operated in Nigeria for a minimum of five years), they, however, do not have the requisite number of branches. Standard Chartered Bank has just 12 branches, while Nigeria International Bank has 13.
The banking watchdog would soon launch a new framework on foreign ownership of Nigerian banks.Soludo who spoke at the “Nigeria Meets the World Summit” organised by THISDAY, had hinted that owing to growing foreign interest in the Nigerian banking sector, the apex bank would soon roll out a framework that would restrict foreign ownership of banks in the country.“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 ten local banks which constitute about 71 per cent of the banking sector,”
He said 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 ten.Justifying the need to roll out a new framework at the 11th edition of a seminar organised for finance correspondents and business editors in Enugu last November, Soludo noted that foreign ownership of local banks had drawn back Nigeria’s economic development.He explained that the decision of the CBN was premised on what it had observed in terms of the relationship between ownership and control of the nation’s financial system and economic development.
He clarified the issue by saying that we had repeatedly said we are limiting foreign ownership in banks. We are currently working on the policy and before the end of the year, we will come up with a clear policy. It does not have much to do with corporate governance but has to do with the empirical evidence about the relationship between ownership and control of the financial system and economic development of a nation especially at the level of our own economic development,” he had said.
He explained then that the Central Bank was not preventing foreign banks from investing in the economy, stressing that what the regulatory authorities would not allow was the acquisition of any local bank.“Foreign banks are allowed to come into Nigeria and set up shops. If they meet the N25 billion requirement, we will give them a fresh licence but if they want to take over some of the existing ones, we will be reluctant to do so,” he had said.
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