Standard Chartered Bank has said that the actions by Central Bank of Nigeria (CBN) in ensuring that the nations banking sector remained sound and safe was timely, saying that such action was most courageous in this period of financial meltdown.
Razia Khan, regional head of economic research Standard Chartered Bank said this on Wednesday in Lagos at the breakfast media forum organised by the bank. She noted that the recent clean up of banks by CBN would facilitate rapid economic growth.
According to her, “the agenda is clear and it is perceived by many to be much faster than expected and there is hope that the action would be positive and the economy would stand to benefit a lot more from it,”
She said that the time frame of full recovery may not be imminent but emphasized that Standard Chartered Bank is not focusing on contraction for Nigerian economy this year. “Clearly, what is happening in the banking sector influences what happens in the oil sector and the cycle tends to be deeper,” she added.
Speaking further, she noted that the time and manner in which nations banking sector regains better confidence is dependent on the liquidity level that is available to it. Adding that, CBN can do a lot more in providing more of the facilities that would lead to quick recovery. “Another challenge depends on the performance of other sector of the economy and how the CBN react to other banks that are yet to be audited which would bring about a clear indication of where they are, at the end of August and for all the banks by the middle of September,” Khan disclosed.
She noted that on the whole, the Nigerian banking sector is in a very good shape and it is very well capitalized and if we get more consolidation, it would boost greater credit growth.
Christopher Knight, managing director, Standard Chartered in Nigeria also said that his bank had a strong preference for organic growth, despite an opportunity for foreigners to buy into five banks rescued in a bailout. According to him, “From the point of view of percentage acquisitions that the government would like to see, or at least investment by foreign banks into domestic banks, we have a very strong preference for organic growth,”
Speaking further, he said that the bank does look at acquisitions when they fill a gap in a product or service or geographic coverage in a particular country. “We are happy with our organic growth and we will just see how things go,” he added.
The CBN recently injected N400 billion into Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank Plc on August 14 and sacked their senior management, saying lax governance had left them dangerously undercapitalised. According to the CBN, “the institutions will be run as going concerns until new investors are found to recapitalize. CBN has made clear that foreign institutions as well as domestic rivals would be welcome to take stakes”,
Lamido Sanusi, CBN governor will be meeting with international banks, lenders and rating agencies in London this Friday to discuss the bank bailout. He said that his preference was to have the rescued banks valued properly and purchased by other banks, rather than other options including setting up an asset management company to soak up bad loans.

CBN in London to defend banking reform

By Alao Salimon
The Central Bank of Nigeria (CBN) is organizing a road show in London today to defend its recent banking reform policy that has led to the exit of five managing director and chief executive officers of five banks in the country.
Mallam Sanusi Lamido, governor, CBN would address stakeholders recent developments in the macroeconomic environment and banking sector in Nigeria. The Governor will be accompanied by some Deputy Governors and the new Managing Directors of the five rescued banks-Union Bank, Oceanic Bank, Intercontinental Bank, Afribank and FinBank.
The managing directors will also be available for a series of 1-on-1 meetings at the same venue. The target audience at the meeting includes international correspondent banks, lenders, rating agencies, Nigerians in Diaspora, members of the diplomatic corp and officials of the Nigerian High Commission.
It would be recalled that Standards and Poor’s, in its recent publication, said it had lowered “both its ‘BB-’ foreign currency and ‘BB’ local currency long-term sovereign credit ratings on the Federal Republic of Nigeria to ‘B+’ but added that the outlook is stable. Moritz Kraemer, credit analyst at S&P said the lowering of the sovereign rating on Nigeria reflects their view of the government’s reduced fiscal flexibility due to costs associated with its recent bail-out of five large domestic banks, and also the fall-off in government oil revenue.
Fitch Rating said the reform in the banking industry is good and did not have rating implications as yet. One of the implications of the rating downgrade is that it might make difficult for the Nigerian government and companies to raise capital from international markets.
Khan,who also advises the executive committee of the bank on matters relating Africa, contended that S&P could not based Nigeria’s rating on its debt issue alone, remarking that it ought to take into account institutional, political and  balance sheet as major factors.
The regional research head for the UK’s bank said it BB- rating for Nigeria was in the first place not a good rating for Nigeria because it has better fundamentals than some other countries in its group. She said Nigeria outperformed its peers in public debt rating. The peers include South Africa, Indonesia and Brazil among others.
Khan, a graduate of the London School of Economics, said Standard Chartered has its own rating methodology for Nigeria because it has been operating in the Nigerian economy for several decades, adding that Nigeria has foreign reserves, proceeds of oil savings, favourable balance sheet and there is increase in oil prices.
“In our view, the reforms we have seen in the Nigerian banking sector are positive and should be seen as a rating positive,” Khan said.  Khan said the implications of reforms in the Nigerian banking industry run deeper than the financial sector alone, remarking that global crisis was a failure of regulation and there was need for financial sector regulation seen everywhere.
She said policy makers have generally backed off, fearing procyclical consequences of tighter regulation.
Khan who holds a master degree in development, including monetary economics and international trade law, said “Nigeria stands apart in this respect because it is more stable and has sustainable growth in its policy aim.  She noted that the confidence of the Nigerian authorities should be rewarded, remarking that if anywhere is going to be Africa’s China or India, it is Nigeria.  
The regional research head for Standard Chartered Bank said the actions of the CBN in ensuring that the nations banking sector remained sound and safe was timely, saying that such action was most courageous in this period of financial meltdown.
She noted that the recent clean up of banks by CBN would facilitate rapid economic growth.
According to her, the agenda is clear and it is perceived by many to be much faster than expected and there is hope that the action would be positive and the economy would stand to benefit a lot more from it.
She said that the time frame of full recovery might not be imminent but emphasized that Standard Chartered Bank is not focusing on contraction for Nigerian economy this year. “Clearly, what is happening in the banking sector influences what happens in the oil sector and the cycle tends to be deeper,” she added.
Speaking further, she noted that the time and manner in which nations banking sector regains better confidence is dependent on the liquidity level that is available to it, adding that, CBN can do a lot more in providing more of the facilities that will lead to quick recovery.
“Another challenge depends on the performance of other sector of the economy and how the CBN react to other banks that are yet to be audited which would bring about a clear indication of where they are, at the end of August and for all the banks by the middle of September,” Khan disclosed. She noted that on the whole, the Nigerian banking sector is in a very good shape and it is very well capitalized and if we get more consolidation, it would boost greater credit growth.