The leaders of five banks were removed from office. Contrary to what was feared, the announcement of this plan did not provoke panic among customers.
On the evening of August 17, Nigeria could breathe. The shock treatment designed to save the banking sector from a risk of collapse unveiled just before the weekend, the first plan of this magnitude ever implemented in Africa, did not provoke a panic that could have to spoil everything.
On Friday, August 14, Central Bank Governor Mallam Sanusi Lamido Sanusi told presidents and CEOs of five Nigerian banks (Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank) that they were dismissed. And to indicate that the issuing institution would intervene to save their institutions by injecting 400 billion nairas (1.8 billion euros) to avoid bankruptcy due to loans not reimbursed, called “unproductive”.
The scale of these bad loans has forced the central bank to intervene repeatedly since 2008 by lending money to these bank for payday loan consolidation. President Umaru Yar’Adua then sought the advice of the former governor of the central bank, architect of the reform of the sector in 2004, the seriousness of the situation. He had seen no reason to act. He was replaced on June 4th. His successor, Sanusi, is the author of the rescue plan that came into effect on Monday.
Fourteen other Nigerian banks are currently being audited by the central bank. “The total unproductive loans amount to 1 143 billion nairas,” said Friday, Mallam Sanusi Lamido Sanusi.
The contingency plan also had the opposite effect. Big was the fear of seeing the account holders, whose number has increased sharply in Nigeria since the sector reform in 2004, come to withdraw their deposits, while the stock prices of the banks would plunge. Security forces had been stationed near the settlements. It was also decided to freeze their listing on the Stock Exchange in the immediate future. According to a statement by his spokesman on Monday, Nigerian President Umaru Yar’Adua “wishes to assure all Nigerians that their deposits are safe since the federal government will continue, in consultation with the central bank, to ensure that no bank can collapse or become insolvent. ” He also asked the police to help the new bank executives recover loans that have not been refunded.
According to concordant sources, some of these impaired loans were made to invest in the Nigerian Stock Exchange or in the financing of oil-related activities (80% of Nigeria’s revenues) during the period of soaring crude oil prices. (Raised up to $ 140 a barrel). When prices dipped, in the second half of 2008, financial mounts collapsed.
At the same time, unsecured loans were made to clients on the basis of their political links. It is also this practice that the package of reforms intends to tackle, so as to give Nigeria banks that can locate in the rest of Africa.
This unprecedented rescue measure should soon be followed by other consequences. In the future, says a source involved in the Nigerian financial system, “the concentration in the banking sector will continue. There will probably be at the end only five major banks in the country”, against 24 currently, and more Another source believes that the mechanisms limiting the share of open capital to foreign companies could soon be relaxed, allowing giants like Barclays or Standard Chartered to take major interests in the Nigerian banking sector.