Africa News blog

Where will Nigerian bank crisis lead?

The list published by Nigeria’s central bank of those who owe money to the banks it has just bailed out makes clear that the situation has already gone well beyond just being a banking crisis.

The list cuts across the business elite and Nigeria’s regions and also includes many politically powerful figures. (And it doesn’t even appear that all those who could have been named as directors of the debtor companies have been identified).

It raises a question as to whether so many of the great and good are simply unable to pay their debts and if so what that means for business in Nigeria as a whole? If they could pay up, then why haven’t they?

It also raises a question as to how those ‘named and shamed’ will react, particularly those with major political sway, in a country where behind the scenes manipulation is a way of life.

The Economic and Financial Crimes Commission has set a deadline for the debtors to start coming up with money or face arrest, but its efforts to prosecute former state governors in the past were sometimes stymied and its former boss Nuhu Ribadu driven from office.

What will be the fate of Central Bank Governor Lamido Sanusi (left), only recently picked for the post by President Umaru Yar’Adua?

How well do you think the crisis is being handled? Please take your chance to vote below. We welcome your comments too.

All change for Nigeria?

Nigeria’s central bank sliced through the hubris of the business elite with its $2.6 billion bailout out of five banks and the sacking of their heads in what looks as though it could be a new era for corporate governance in Africa’s most populous country.

Recently appointed Central Bank Governor Lamido Sanusi said lax governance had allowed the banks to become so weakly capitalised that they posed a threat to the entire system, and described the move as the beginning of a “restoration of confidence” in sub-Saharan Africa’s second biggest economy.

The 1.14 trillion naira ($7.6 billion) in bad loans run up by the banks is roughly equivalent to the combined annual income of the poorest 20 million people in Africa’s most populous nation, each of whom live on around $1 a day.

Yet the “Friday massacre”, as one newspaper dubbed it, set Blackberries buzzing in Lagos champagne bars not because of the breathtaking scale of the money involved, but because of the might of the corporate aristocrats felled by Sanusi’s axe.

“Ordinarily in Nigeria there is a sacred cow culture,” said Reuben Abati, a respected leader writer and chairman of the editorial board of Nigeria’s Guardian newspapers.

“Once someone is prominent in a particular industry you assume those persons are untouchable. What Sanusi has done now is to say nobody is too big to be held accountable, whether they are an Ibru or an Akingbola.”

Cecilia Ibru and Erastus Akingbola — the former chief executives of Oceanic Bank and Intercontinental Bank — were arguably the highest-profile casualties of the cull, titans in a corporate elite dominated by egos and empire builders.

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?