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NIGERIA
A new business climate |
 Business - Economy - Lean and clean - Core issues - Home truth -
Oil business - Private sector - Banking
 BANKING AND FINANCE
In the nigerian economy, the financial sector has seen enormous growth. The number of banks has more than tripled in the past one decade.
Dr. Long says at the height of the banking boom there was something like 60 so-called merchant banks in nigeria. "There cannot be any justification for having 60 Merchant banks in a market of this a market of this size. I reckon we can get by with three or four". Perceiving that they are strategically disadvantaged, some of the merchant banks have been seeking conversion to commercial banks.
A number of the banks are calling for universal banking whereby they are not restricted in terms of the services they can offer. The Central bank agrees that the trend towards universal banking has assumed a global dimension. In nigeria, though the laws delimit activities of commercial and merchant banks , the process of deregulation and liberalization has reduced some of the functional barriers between commercial and investment banking.
Still, universal banking in nigeria will have to await necessary changes to the banking laws. About six merchant banks have however fulfilled the criteria set by the Central Bank and have converted to commercial banks. nigerian banks have a minimum capital base of US$ 5 million but the top echelon can boast shareholders funds well in excess of US$ 10 million. The banks are oriented mostly to financing import trade and defend this by pointing out that the economy is heavily import dependent. Though the banks buy foreign exchange weekly from the Central bank, a good number of them, by encouraging exporters, are able to generate additional forex to meet their customers needs.
Says Dr. Long: "traditionally, the banking industry has not been service conscious. But things have changed quite a lot in recent years. It was largely due to the entry of Citibank into the market that new standards were set across the banking industry".
The domestic banks are expecting competition from the international market and as such are retooling their operations. Mr. John Edozien, managing director of Afribank nigeria Plc says his bank has developed into a financial supermarket. He says: "We have supported major, triple A Customers. Afribank is positioning itself to play a middle role in this kind of upsurge in investor interest in nigeria".
Merchant Bank of Commerce , MBCOM, which plays the oil and gas plus multilateral agencies niche markets, is among ten investment banks seeking conversion to commercial banks. Mr. Ike Nwabuoku CEO explains: "If you are a commercial bank, you have access to more funds, and so we can do more investments in these areas that are our niche markets".
The Central Bank says the banking system has coped well with the challenges of the domestic and international environments. "However, many observers have started to view a anew system of banking practices as a new millennium approaches". For now, banking regulators are keener on enthroning a sound banking environment and fully restoring public confidence in the financial sector.
Merchant banking operations remain relatively small while discount houses record modest growth just as community banks are constrained by the distress factor. Activities of finance companies and insurance companies have been on the rise. The capital market has been recording increased inflow of portfolio investment though the market's shallowness poses a severe limit. The government has to unleash the financial market. Their constraints notwithstanding, the banks are poised to market nigeria.
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Mr. Edozien says nigeria is a most attractive investment environment and that his bank will place its enormous banking services at the disposal of foreign investors.
Dr. Long speaks of his bank, FCMB's readiness for foreign investors: "We welcome every business opportunity. Yes we will be delighted to see more major American multinationals setting up business here. That's a business opportunity for us". Mr. Kekere-Ekun, of Habib Bank is keen to receive foreign investors. He says: "When most American businesses come to nigeria, they automatically go to Citibank. When they try us, they will find out that our services are virtually the same and even in some cases, better".
The minister of finance, Mallam Adamu Ciroma , says the government is sending the right message by divesting its interests in banks and industrial operations while opening all areas of the economy, including electricity and telecommunication, to private investment. "These are likely to attract large scale foreign investors and therefore more banking, securities and stock exchange link-ups"
He assures investors that democracy has come to stay and that every institution is embracing openness and transparency. "This country is big and will increasingly offer attraction for large investments in various areas of human endeavor. I believe investors will find nigerians affable, welcoming and cooperative.
The culture and tourism minister adds that the world has long suffered ignorance and wrong perception about nigeria. He invites the world: "Come to Africa if you want to experience black civilization. nigeria is the soul of Africa, and any African experience that does not include nigeria is far from complete".
All across the nigerian economy, you find hands eagerly reaching out to the world. This starts from the President and extends to the head of most major institutions. In his address to the legislature Obasanjo reiterates: "Our administration promises to provide a stable and secure enabling environment for all those seeking to do legitimate business within nigeria. The world is watching us with keen and unusual attention. An unparalleled sense of hope that nigeria shall rise again is pervading all parts of the world". The international business community is having to prove first hand that it is indeed a new dawn in nigeria. |
© World INvestment NEws, 1999.
This is the electronic edition of the special country report on nigeria published in FORBES Magazine,
October 18 th issue.
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nigeria
