Nigeria plans merger of fragile banks

Speaking in the capital, Abuja, on Tuesday, CBN governor Charles Chukwuma Soludo said that some of the reforms would ensure the merger of banks to enhance their performance.

“The Nigerian banking system today is fragile and marginal. The system faces enormous challenges which, if not addressed urgently, could snowball into a crisis in the near future,” Soludo said.

He identified the problems of the banks, especially those seen as feeble, as persistent illiquidity, unprofitable operations and having a poor assets base.

Soludo also voiced concern over a spate of frauds, ethical misconduct, forgery and, in some cases, the use of women as prostitutes in the service of “marketing”.

Capital base

Some other measures envisaged under the reform programme include ensuring the minimum capitalisation for banks to be $188m before December and phased withdrawal of public sector funds from banks beginning this month.

“The Nigerian banking system today is fragile and marginal. The system faces enormous challenges which if not addressed urgently could snowball into a crisis in the near future” Charles Chukwuma Soludo Governor of CBN

Directors of failed banks and money launderers would be prosecuted fully, he said.

“The inability of the Nigerian banking system to voluntarily embark on consolidation in line with the global trend has necessitated the need to consider the adoption of appropriate legal supervisory frameworks … to facilitate mergers and acquisition as a crisis resolution option,” he said.

There are 89 banks in Nigeria. But the largest bank has a capital base of only $240m, compared to $526m for the smallest bank in Malaysia.

The CBN found performance at 62 of the 89 national banks to be “satisfactory” as of last March; 14 to be “marginal” and 11 to be “unsound”.

The remaining two did not render any returns for assessment, Soludo said.