CBN okays open bidding for distressed banks

By Peter Egwuatu
LAGOS —GOVERNOR of Central Bank of Nigeria, CBN, Mr Lamido Sanusi said, yesterday, that capitalisation was not the major problem with banks, rather lack of corporate governance and mis-management, warning that any foreign investor interested in any bank should not think that provision of money will guarantee their approval to invest in any of the troubled banks.

Speaking at The Economist Conference, tagged “Renewing Business Confidence, CEO Agenda Nigeria”, Sanusi said: “Money is not the problem with our banks. We have money that can be given to all the banks but our major concern is that of governance, proper management and risk management.

So any foreign investor coming to invest in the sector must have the technical expertise for proper management, corporate governance and risk management skill before the CBN will either give licence to open a new bank or invest in existing banks”

Meanwhile, the second biggest bank in South Africa, FirstRand, has expressed interest in buying one of the eight troubled Nigerian banks rescued by the Central Bank last year, the company’s new managing director, Sizwe Nxasana told Reuters yesterday.

The CBN was reported to have asked for potential bidders to register their interest in the troubled banks by mid-December to test the appetite for acquisitions as the regulator looks to reshape Nigeria’s banking landscape.

The regulator has not published the names of any interested party. “We did register interest in that process. I’m not able to mention (which bank), but we certainly registered our interest,” FirstRand’s managing director said on the sidelines of an economic conference, FirstRand, South Africa’s number two banking group, is the first foreign bank to confirm it is interested in buying one of the troubled banks. Nigeria’s Fidelity Bank said in November it was also a potential bidder.

Nxasana, who took over the reins of FirstRand in December, said FirstRand is looking to invest “meaningful amounts of capital” and fund any deal from its internal reserves, adding:”We are looking at opportunities, especially given the reforms taking place driven by the Central Bank of Nigeria.”

Sanusi, while speaking on the opportunity for foreign investors owning banks in Nigeria, said, “The economy is open for any investor to come in. At the moment, CBN is undergoing technical assessment of applications submitted to it. Foreign investors are encouraged to invest in banks but we are not looking for hot money. We are looking for investor who has the interest to invest in our economy for long term. They must possess the expertise for risk management, corporate governance and overall management.

Passage of the bill

“One of major problems with the troubled banks was the level of exposure to the capital market. I hope when the Asset Management Company (AMC) takes off, the recapitalisation problem would be solved. We are expecting approval from the National Assembly as the AMC bill is still with them.

The yuletide has delayed the passage of the bill. Probably in the coming few weeks the bill will be approved. When the toxic asset is bought by the AMC, probably the banks will just require additional N300 or N400 billion to stabilise.

On the issue of high cost of funds, the CBN governor said that power and other major infrastructure was the major cause. He noted: “There is no way cost of funds will be low when there is no major infrastructure in place. Banks opened many branches and they needed infrastructure to run them.”