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Why Nigerian banks cann’t make in roads into South Africa, Sanusi

Central Bank Governor, Malam Sanusi Lamido  Sanusi, has explained why the Nigerian banks could not make in roads into the South African economy.

Sanusi told the News Agency of Nigeria (NAN) in Pretoria on Monday that  this was due to “unattractive returns on investment”. He said South Africa has one of the most developed markets in Africa where the margins are very thin.

“The reality is that the amount of capital you require to set up a bank in South Africa today is such that it is not profitable or wise for Nigerian banks to do so. Imagine a Nigerian bank raising so much capital and coming here to compete with Standard bank, Ned bank or Absa. They simply cannot compete. So, it is the economics of it,” he said.

Sanusi who said his mission was to meet his counterpart to strengthening bi-lateral relations, said Nigerian banks would faring better at home or in less developed markets with growth potentials.

“You invest if you are going to get a good return on your investment and if you are ble to compete in the market. The returns they make in the Nigerian market are much higher.  Imagine a Nigerian bank raising so much capital and coming here to compete with Standard Bank or Ned Bank. They simply cannot compete. So, it is the economics of it,” he said.

Sanusi said most Nigerian banks have looked at it and decided that they are much better with a much smaller amount of capital spreading into less developed markets  with greater growth potentials.

He said South African banks were trying to move out to other markets where they would get a much higher return on capital in Nigeria, Angola, Ghana and  in Sierra Leone.

“The South African Banks are going to Nigeria, Kenya and Ghana because  the growth potentials in those markets are higher than the growth potentials in their country. Here in South Africa, the economy growth forecast 2.3 per cent, but we  are growing at 8 per cent forecast.

“We grew at 7 per cent last year. We have a country of 150 million people  and it is still under-banked,” he said.  Sanusi said the apex bank was working on a MoU that would strengthen  cooperation with the South African Reserve Bank.

The CBN governor, speaking on coins which are largely used in South  Africa, but highly rejected in Nigeria, said, “it is sad, but it is just the reality. We keep telling people there is no reason they should reject coins, but  it is all about demand and supply. It has become a cultural thing now,” he said.

Sanusi said it was illegal to reject coins in Nigeria but culturally, people  did and it was impossible to force them to accept it. “You can’t force people to accept something. It is legal tender and  technically no bank should reject it and if a bank does, it is illegal,” he said.

He said among the populace, the reality of economic activity is such  that there are very few activities that could be conducted with coins. “You have to carry many coins to conduct a transaction and I suppose people find it more convenient to have a N10 note than to carry 10 coins.Sanusi said the controversies over the use of funds in the Excess Crude Account were unnecessary, saying the fund was for stabilising the economy following fluctuations in the prices of oil.

He said if the government does not spend money in times of cash crunch, the country would go on its knees. NAN reports that the CBN governor spoke as South African Banks continue to expand their frontiers into Nigeria economy, eyeing some troubled banks. Standard Bank says it is eyeing further growth opportunities in Nigeria”s banking sector through select acquisitions and has indicated interest in the next round of consolidation in the sector.

First Rand also said it has announced interest in participating in the Central Bank of Nigeria”s process of consolidating its banking industry.


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