The Governor of the Central Bank of Nigeria, Prof. Charles Soludo, on Friday declared that foreign banks would not be allowed to take over Nigerian banks.
He said the CBN was working on the issue of limiting foreign ownership in banks and would soon come out with a formal policy.
Soludo, who spoke at the 11th Annual Seminar for Finance Correspondents and Business Editors in Enugu, disclosed that the decision to keep foreign banks away was for developmental reasons.
�However, the decision that the presence of government in any bank should not exceed 10 per cent has to do with corporate governance. Where you have government dominance in a bank, politics often takes the centre stage,� he explained. According to him, there is a relationship between the ownership and control of a bank and a country�s economic development.
He argued that the foreign banks that had been operating in Nigeria for about 20 years, for instance, only had a few branches, which were concentrated in major cities such as Lagos and Port Harcourt. Soludo said that even where the affected bans� chief executives were in Nigeria, major decisions were taken from abroad.
Citing examples of other countries, he said in Singapore, foreign banks were allowed to operate in the country and do everything they wanted to do except attempting to acquire any of the three local banks. He said, �The decision is in consideration of the fact that the banking system is at the heart of the economy. If you close it, you close the economy.�
Comparing Singapore with Mexico, he said the latter issued licences without restrictions to foreigners, with the result that foreigners now control over 90 per cent of the country�s banks. He said the ownership structure in Mexico affected development, noting that the Mexican Government had, therefore, decided to set up government-owned banks to aid its development objectives.
�We are lucky in Nigeria that we still have a banking system that is still firmly in the hands of Nigerians. If what is going on now in other parts of the world is anything to go by, they (the foreign banks) are not likely to be as aggressive as the major banks in terms of reacting to the local needs of Nigerians, even if they come in to operate.
�Foreign banks are allowed to come and set up shop if they meet the requirements. But if they want to take over, we will not allow them,� he declared. The CBN boss, however, reiterated the commitment of the bank towards entrenching good corporate governance in banks, saying that it would continuously monitor banks� compliance with the code of corporate governance while sanctioning those found guilty of non-compliance.
At the 2007 annual bankers� dinner, held about two weeks ago, the CBN boss had said that foreign banks would not be allowed to take over control of Nigeria�s top 10 banks, which he described as �Nigeria�s budding champions.�
The need for a policy on limiting foreign ownership in general, he said, stemmed from the experiences of other countries.
Nov102007