The Central Bank of Nigeria’s (CBN)
dramatic attempts to clean-up the country’s banking sector is
widely expected to accelerate long anticipated consolidation of the
sector. The CBN has either dismissed or had arrested senior
management (executive and non-executive) at five leading lenders –
Oceanic International, Intercontinental, FinBank, Union Bank and
Afribank – while also injecting NGN420 billion ($2.72 billion) into
the banks to keep them viable.

Four former bank managing directors, eight
bank directors and one bank debtor remain in custody, facing 131
charges in total involving NGN626 billion, including fraud,
concealment and grant of loans without adequate collateral. Further
charges against debtors for conspiracy to obtain loans under false
pretences are widely expected.

The five troubled lenders account for
approximately 40 percent of the country’s banking sector, while
many of the senior bankers who were dismissed had been regarded as
among the country’s ‘corporate aristocracy’.

The aggregate non-performing loans at the five
banks are, said the CBN, in the region of NGN1.14 trillion.

International stakes

CBN governor Lamido Sanusi has pledged to
prevent any of the country’s banks from failing and said
international banks will be allowed to buy stakes in the

In a statement, the CBN said: “The loan is an
accommodation facility intended to improve the liquidity position
of the banks to enable them meet their obligations and will be

The state has not taken stakes in the affected
banks and instead will encourage them to raise fresh capital and
merge with stronger banks.

South African-based banks in particular will
be viewing the latest developments in Nigeria with interest,
including Standard Bank, already present in the country via its
IBTC subsidiary (see CEO interview, RBI

Absa will also, inevitably, be linked to a
Nigerian acquisition. It has an outstanding application on the
table for a representative office in the country and its CEO Maria
Ramos told RBI that “if there is a deal we can do [in
Africa] that is value accretive… we will do it,” (see ‘Proud to be the nation’s savings
although she declined to be drawn on whether she
had Nigeria in mind.

The UK-headquartered but internationally
focused Standard Chartered, already present in Nigeria, is another
likely candidate to augment its presence in the country.

The country’s Economic and Financial Crimes
Commission’s campaign to recover debts due to the five banks
recovered NGN66 billion within two weeks of its launch in mid
August. According to Sanusi, the CBN’s very public policy of naming
and shaming Nigeria’s largest debtors, will play its part in
improving financial accountability.

In a state of flux

Meantime, the Nigerian banking sector
remains in a state of flux.

According to the CBN, one of the five troubled
banks is insolvent, but it has not said which one is in a terminal
condition. An audit of all of the country’s 24 banks (with the
exception of the internationally or privately owned Citi, StanChart
and Equatorial Trust Bank) is ongoing, with analysts forecasting
that the sector as a whole may require recapitalisation of more
than NGR1 trillion.

Audits at First Bank, United Bank for Africa,
Guaranty Trust, Diamond Bank and Sterling Bank, have been concluded
with the banks certified fit.

Banks made up just over half of Nigeria’s
stock market capitalisation at the end of July, down from
two-thirds at the start of the year, the Nigerian stock market
having fallen by around 25 percent since the start of the year.


Nigeria – top 10 banks ranked by


Total assets (NGNtrn)

First Bank of Nigeria(1)


Zenith Bank(1)


United Bank for Africa(2)




Union Bank of Nigeria(4)


Platinum-Habib Bank(5)




Guaranty Trust Bank(7)


Skye Bank(1)


Access Bank(2)


(1) at 30 September 2008; (2) at 31 March
2009; (3) at 29 February 2008; (4) at 31 March 2008; (5) at 30 June
2008; (6) at 30 September 2007; (7) at 31 December 2008 Source: