Africa News blog

Are Nigerian banks set to boom?

Few investors dispute the view that Nigeria’s banks look cheap at the moment, with most of the major players trading at a discount to book value and with earnings multiples way below consumer stocks such as Guinness Nigeria.   Nor is anybody arguing against the long-term logic of the financial sector’s potential growth in an oil-rich country of 140 million people but only 23 million bank accounts.   A new central bank head with a background in risk management is also making all the right noises about improving the sector’s notoriously murky financial disclosure – part of the reason the shares crashed so spectacularly in the latter half of 2008.   Furthermore, Lamido Sanusi’s stated desire to relax limits on foreign ownership has breathed new life into the view that another wave of consolidation, this time involving major global players, sits around the corner.   Does all this sound – like so many other Nigerian promises of easy money – too good to be true, or are its banks set on a long-term trajectory that will ultimately see them realise the dream of making Lagos a financial hub to rival Johannesburg?