Central Bank Governor, Malam Sanusi LamidoÂ 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 thatÂ this was due to â€œunattractive returns on investmentâ€. He said South Africa has one of the most developed markets in Africa where the margins are very thin.
â€œThe 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,â€ 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.
â€œYou 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.Â 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,â€ 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 marketsÂ 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 andÂ in Sierra Leone.
â€œThe South African Banks are going to Nigeria, Kenya and Ghana becauseÂ 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 weÂ are growing at 8 per cent forecast.
â€œWe grew at 7 per cent last year. We have a country of 150 million peopleÂ and it is still under-banked,â€ he said.Â Sanusi said the apex bank was working on a MoU that would strengthenÂ cooperation with the South African Reserve Bank.
The CBN governor, speaking on coins which are largely used in SouthÂ Africa, but highly rejected in Nigeria, said, â€œit is sad, but it is just the reality. We keep telling people there is no reason they should reject coins, butÂ it is all about demand and supply. It has become a cultural thing now,â€ he said.
Sanusi said it was illegal to reject coins in Nigeria but culturally, peopleÂ did and it was impossible to force them to accept it. â€œYou canâ€™t force people to accept something. It is legal tender andÂ technically no bank should reject it and if a bank does, it is illegal,â€ he said.
He said among the populace, the reality of economic activity is suchÂ that there are very few activities that could be conducted with coins. â€œYou 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 Nigeriaâ€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 Nigeriaâ€s process of consolidating its banking industry.