CBN Policy on Foreign Ownership Of Banks
THE Central Bank of Nigeria (CBN) restated its stance on preventing foreign banks from acquiring Nigeria's largest banks or allowing them to own more than 10 per cent equity in such choice banks.It however said,foreign banks with investment interests in Nigeria were free to apply for a licence to establish banks provided they were prepared to operate within the stipulated banking regulations.
The apex bank said the clarification had become necessary with recent commentaries in the media in respect of insinuations recently by the Mayor of London, Mr. Alderman Lewis, during his visit to Nigeria last month that the Nigerian government was not opening up its banks for foreign competition. But the CBN Head of Corporate Affairs, Mr. Festus Odoko, who issued a statement yesterday, faulted the London Mayor's submission.
According to the CBN, the policy introduced last year by the apex bank was in part to protect the Nigerian economy from being hijacked by foreigners and secondly to encourage the establishment of foreign banks in the country.
The position of the CBN has been that foreign banks and/or investors are allowed to establish banking business in Nigeria, provided they meet the current minimum capital requirement of N25 billion and other applicable regulatory requirements for banking licences as prescribed by the CBN.Such foreign individuals or institutional investors could also invest in existing Nigerian banks. There is, however, a condition that no single foreign individual/institutional investor should acquire more than the share of the single largest Nigerian individual/institutional investor in any bank, provided the aggregate shareholding of the foreign investors do not exceed 10 per cent of the total capital of the bank.
Also, foreign banks could acquire or merge with a local bank existing in Nigeria.Such a foreign bank, however, according to the CBN policy, must have operated in Nigeria for at least five years and established branches in at least two-thirds of states of Nigeria (excluding the state capital), provided the foreign bank/investors' shareholding arising from the merger/acquisition should not exceed 40 per cent of the total capital of the resultant entity.
The policy also states that the existing shareholding structure of Nigerian banks in which there are foreign interests in excess of 10 per cent might subsist but such foreign interest should not exceed the current level. The CBN concluded that she is acting in the interest of all stakeholders, particularly in view of the critical link between ownership and control of commercial banks and economic development.
Recent experience shows that foreign banks have been reluctant to expand branches across the country and operate only in few metropolitan cities. Again, the structure of their loan portfolio indicates concentration in favour of multinationals.
The apex bank said the clarification had become necessary with recent commentaries in the media in respect of insinuations recently by the Mayor of London, Mr. Alderman Lewis, during his visit to Nigeria last month that the Nigerian government was not opening up its banks for foreign competition. But the CBN Head of Corporate Affairs, Mr. Festus Odoko, who issued a statement yesterday, faulted the London Mayor's submission.
According to the CBN, the policy introduced last year by the apex bank was in part to protect the Nigerian economy from being hijacked by foreigners and secondly to encourage the establishment of foreign banks in the country.
The position of the CBN has been that foreign banks and/or investors are allowed to establish banking business in Nigeria, provided they meet the current minimum capital requirement of N25 billion and other applicable regulatory requirements for banking licences as prescribed by the CBN.Such foreign individuals or institutional investors could also invest in existing Nigerian banks. There is, however, a condition that no single foreign individual/institutional investor should acquire more than the share of the single largest Nigerian individual/institutional investor in any bank, provided the aggregate shareholding of the foreign investors do not exceed 10 per cent of the total capital of the bank.
Also, foreign banks could acquire or merge with a local bank existing in Nigeria.Such a foreign bank, however, according to the CBN policy, must have operated in Nigeria for at least five years and established branches in at least two-thirds of states of Nigeria (excluding the state capital), provided the foreign bank/investors' shareholding arising from the merger/acquisition should not exceed 40 per cent of the total capital of the resultant entity.
The policy also states that the existing shareholding structure of Nigerian banks in which there are foreign interests in excess of 10 per cent might subsist but such foreign interest should not exceed the current level. The CBN concluded that she is acting in the interest of all stakeholders, particularly in view of the critical link between ownership and control of commercial banks and economic development.
Recent experience shows that foreign banks have been reluctant to expand branches across the country and operate only in few metropolitan cities. Again, the structure of their loan portfolio indicates concentration in favour of multinationals.
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