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.

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?

Zuma’s balancing act

South African President Jacob Zuma has a tough balancing act to perform as he begins his term in office.

 On the one hand, Zuma is anxious to assure investors that there will be continuity in the economic policies that have secured the country’s status as the regional powerhouse.

On the other, he has to address the increasingly vocal demands of his allies in the labour movement, whose support propelled him first to the leadership of the ruling ANC and then to the country’s top government job after April 22 elections.

But what the unions want – increased social spending to cushion their members against the ravages to the global recession that has now also landed in South Africa – would mean veering away from the prudent fiscal stance that has ironically cushioned the country from the worst of the world crisis.

Investors are also keen to see whether Zuma bows to pressure not to renew the contract of central bank Governor Tito Mboweni, loved by financial markets but vilified by unions that say a pre-occupation with inflation targeting has seen the Reserve Bank maintain a tight monetary policy at the expense of economic growth, impoverishing millions.

Is Zimbabwe’s Gono going?

The acknowledgement by Zimbabwe’s central bank governor that it raided the private bank accounts of companies and donors to fund President Robert Mugabe’s government during the economic crisis has increased speculation over his fate under the new national unity government.

Central Bank Governor Gideon Gono said the central bank took foreign currency from private accounts to help pay for some $2 billion in loans to state-owned companies and utilities and for power and grain imports. He said the government still had to repay about $1.2 billion, so the bank could repay the money it owes.

Heading the central bank at a time Zimbabwe was suffering economic collapse and hyperinflation that touched at least 231 million percent a year (according to official figures) was never going to be a badge of honour for the governor, but as he made clear in his statement, Zimbabwe’s problems went beyond economics.

“It was a political problem and not an economic one that drove us into the difficulties this nation experienced, and quasi-fiscal operations were a response to those political challenges we have now resolved through the inclusive government,” the statement said. “Our call is to let bygones be bygones and for everyone and every entity to start anew and open a new page.”

Gono has come under pressure from Prime Minister Morgan Tsvangirai’s Movement for Democratic Change (MDC) to resign since the former opposition party joined Mugabe in a unity government in February. Western diplomats have also said Gono’s departure could help bring a resumption of badly needed aid.

Are his days numbered now Tsvangirai and Mugabe seem to be working together more closely than many might have expected?