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Nigeria Opens For Business

Nigeria Opens For Business

After the tsunami in the financial sector over the last 18 months, which compelled the Central Bank of Nigeria (CBN) to take control of eight commercial banks, with the Economic and Financial Crimes Commission (EFCC) prosecuting several executives for mismanaging bank funds, confidence is being restored to the sector, even if very slowly.

Sanusi Lamido Sanusi, the blunt-speaking governor of the Central Bank of Nigeria (CBN), has, to industry and public acclaim, bravely confronted some of the sharp practices amongst unethical bankers, which impacted negatively on the long-term stability of the sector.

Last year Governor Sanusi said: “The Central Bank has a responsibility to act to protect all depositors and creditors and ensure that no one loses their money due to the failure of a bank. The Bank … needs to restore confidence to the banking system.” And that is exactly what he has done.

Since then, when the total loan exposure of the “distressed” banks nearly reached $20bn, with their non-performing loans ranging from 19% to nearly half of their total portfolios, the injection of funds from the CBN into the troubled banks has prevented a crisis of confidence, as mass withdrawals from panicked depositors would have certainly led to the collapse of the banking system. The setting up of the Asset Management Company of Nigeria (AMCON), which has absorbed the “toxic debt” of the sector, has also helped to calm frayed nerves.

During the forced nationalisation, in August this year, of Bank PHB, Spring Bank and Afribank, now known as Keystone Bank, Enterprise Bank and Mainstream Bank respectively, after nearly a year of the CBN’s direct intervention, AMCON admitted that it lost the “stabilisation funds” of N226bn (almost $1.5bn) it had injected into the three banks.

But Mustafa Chike Obi, AMCON’s CEO, said the situation could have been a lot worse had they not intervened. And to give the “new” banks a shot of getting out of very troubled waters, AMCON has made a further injection of nearly $4bn.

It is hoped that these funds would be recovered by AMCON when the banks return, hopefully, to profitability under new local management or when, as suspected, they will be acquired by foreign owners interested in becoming players in Nigerian banking.

Fundamental changes are expected in the Nigerian stock market as well, where Ndi Okereke-Onyiuke, the previous director-general of the Nigerian Stock Exchange (NSE), who was dismissed under a cloud of controversy, is still fighting the Securities and Exchange Commission (SEC) over her sacking.

Oscar Onyema, the new NSE boss, with 20 years’ experience in the US stock exchange system, told New African that after the last stock market crash in 2010, a new corporate chapter is beginning at Lagos’s Kakawa Street, where their headquarters is based.

“We are embarking on a fundamental programme, we are changing everything around the Exchange, from corporate governance to the structures of the divisions,” he said in an exclusive interview.

“In the four [new] divisions, we have market operations and technology, which is going to improve our technology platforms [the NSE are in advanced talks with NASDAQ, who are expected to be their technical partners], we have business development, which is geared to retaining and attracting companies [onto the Exchange], producing new products and enhancing existing ones, as well as being able to distribute our services across the country and the globe.”

Onyema continued: “Improving the quality of corporate governance amongst the companies listed on the Exchange is critical, as one of the major problems for the Nigerian capital market is investor apathy… The SEC [Securities and Exchange Commission] has come up with a code of corporate governance, which we wholly subscribe to and support.”

With a market capitalisation goal of N1trn ($6.5bn) over the next five years, Onyema admits that this “aggressive target” will require diligence from his team, if it is to be achieved.

“My goal for the Nigerian Stock Exchange is to position us as the gateway to African markets, one that is based on durable wealth creation, accountability and market development.”

A bullish Onyema advised the international investing market with an interest in an emerging economy like Nigeria to always come in for the long haul, rather than as a buccaneer seeking quick and relatively painless profit.

“Nigeria is open for business and the Exchange is open for business,” Onyema said. “There is significant growth opportunity and significant returns can be had in this market, regardless of what we are seeing in the global exchange marketplace. With an economy that is growing at 7% per annum, the kind of returns we give cannot be had in most jurisdictions of the world.”

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Written by Baffour Ankomah

Baffour Ankomah, born in Ghana, has been editor of New African since July 1999. His passion is Africa and its Diaspora. A journalist since 1980, Baffour started his career at The Pioneer, the oldest existing newspaper in Ghana, where he became editor 1983-86. He joined New African in mid-1988 as assistant editor, then rose to deputy editor in 1994, and editor in 1999. His column, Baffour's Beefs, a big hit for New African readers, has been running since 1988.

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