Africa News blog
African business, politics and lifestyle
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.
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.
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?