World Bank to fund Nigeria bank consolidation


TUESDAY, 27 JULY 2010 01:21       


The World Bank through its private sector arm is providing funds that would enable Nigerian banks to buy distressed counterparts rescued in the N4 billion bail out last year.


This emerged as Asset Management Company of Nigeria (AMCON) will have a revised share capital of N250 billion ($1.9 billion), more than 20 times the amount originally proposed in the first draft, according to a copy of the final legislation seen by Reuters on Monday.


The International Finance Corporation (IFC) said it had already agreed to provide a total of $300 million to Guaranty Trust Bank and First Bank and that it was also in talks with several others about providing financing.


First Bank, Diamond Bank, Fidelity Bank and Skye Bank have all registered interest in taking stakes in rescued bank, and others, including United Bank for Africa, are expected to join in. “What we are looking to do is to work with potential acquirers of the distressed banks,” Solomon Adegbie-Quaynor, IFC’s Nigeria country manager, told a news conference.“So some of the finances you will see provided to particular banks are also with the intent of supporting the acquisition of some of the distressed banks,” he said.


The IFC said it would provide $200 million in long-term funding to GT Bank, Nigeria’s sixth-biggest bank by assets, and $100 million in convertible debt and senior loans to First Bank, the nation’s biggest and oldest lender.GT Bank, which has not signalled any interest in buying a rescued bank, said earlier on Monday $30 million of the funds would come through the IFC buying shares in a private share placement. Nigeria’s central bank last year injected $4 billion into nine banks judged to be so weakly capitalised they posed a risk to the system in sub-Saharan Africa’s second biggest economy. The regulator is seeking new investors to recapitalise them.


Nigerian President Goodluck Jonathan last week approved legislation creating the Asset Management Company of Nigeria (AMCON), a “bad bank” which will buy up non-performing loans in exchange for government bonds in a bid to make the rescued lenders saleable.Nigeria’s banks have agreed to make available 0.3 percent of total assets each year for the next decade, capped at a cumulative 1 trillion naira, to help cover any debts incurred by AMCON to prevent extra costs to government. The central bank has warned it will have no other option than to liquidate any rescued banks that fail to find fresh capital.


Central Bank Governor Lamido Sanusi said last month a number of foreign banks and private equity companies had expressed interest. South Africa’s First Rand FRSJ.J, Standard Bank and Nedbank have all said they are interested in investment opportunities in Nigeria.






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