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Godwin Emefiele, CBN Governor
Godwin Emefiele, CBN Governor

Recession: Foreign banks in Nigeria set to acquire local ones

Some foreign banks which are operating in Nigeria are planning to acquire and recapitalise weak banks in the country, recent developments have shown.

The weak banks are currently valued below their true worth in the country’s capital market, following the prevailing negative sentiment of investors, which has diminished their capital status, making them in dire need of additional capital.

The current devaluation of the naira is aggravating the problem and diluting the financial power of Nigerian banks.

The Senior Associate, Investment Banking at Afrinvest, Mr. Ayodeji Ebo, told our correspondent in a telephone interview on Saturday that the current development in the nation’s economy was making weak Nigerian banks attractive to foreign banks.

He said the Nigerian banks in question were open to additional capital and attractive to foreign investors “because foreign investors need lesser capital to acquire them now, compared to when the naira was stronger.”

“The low prices at which the stocks of these banks are sold in the capital market and the current devaluation of the naira are making the banks attractive to the foreign banks.

“Most of the banks have poor capital adequacy ratio, which would drive the quest for additional capital by them,” he said.

It was further learnt, The Chairman of FirstRand Limited, Laurie Dippenaar, whose firm is seeking an acquisition of mid-sized lender in Nigeria, is also considering one other target after ending talks with two lenders due to disagreement over price.

“The Johannesburg-based company would prefer an institution with a big branch network, though (it) is unlikely to buy any of the country’s large banks,” Bloomberg quoted him as saying.

Nigeria is in the grips of a year-long recession as the country struggles to cope with oil prices that have halved since mid-2014 and shortage of foreign currencies that has caused the naira to plunge in value.

Mid-sized lenders, including Diamond Bank Plc, Sterling Bank Plc and Wema Bank Plc, tumbled more than 40 per cent last year as investors fled to the safety of the country’s largest financial institutions.

FirstRand walked away from buying control of Lagos-based Sterling Bank Plc in 2011 because the asking price was too high.

 

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