By Ademola Alawiye with agency report   Tuesday, 28 Sep 2010

 

Nigerian banks will not raise lending to the private sector until the beginning of next year, the Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, has said.

 

Sanusi said that the banks would begin serious lending from the first quarter of next year, once they had been restructured and the CBN had bought $10bn worth of toxic debt.

 

Bloomberg quoted Sanusi as saying in an interview in Abuja, ”I don‘t think you‘re going to have a pick-up in lending until at least the first quarter of 2011. This quarter is likely to be a quarter of deals, mergers and acquisitions, and one for the beginning of integration.”

 

The CBN had bailed out 10 banks last year with N620bn to avoid a collapse of the financial system, and is now pushing for the take-over of some banks and the merger of others. The purchase of toxic debt by the state-owned Asset Management Corporation of Nigeria will be part of the negotiation.

 

Bank lending to the private sector has declined in five of the past eight months and has not changed significantly from December last year.

 

Sanusi noted that the CBN banks would work with other banks to cut the cost of running their businesses by 30 per cent over three years.

 

Sanusi said, ”In terms of an improvement in profitability, there is more aggressive cost reduction by the banks, so the margin will improve very quickly. The share price will recover in reaction to a return to profitability. The government has created a team of inspectors that it can send to commercial banks in order to reduce the threat of a repeat of last year‘s banking crisis.”

 

The Nigerian Stock Exchange’s Banking Index, which tracks performance of the top 10 capitalised and most liquid stocks in the industry, has fallen by 1.3 per cent this year and is down by 68 per cent since the start of 2008.

 

Shares in Zenith Bank Plc have gained 8.5 per cent and declined by 52 per cent over the same periods.

 

Sanusi fired the chief executive officers of eight of the country‘s 24 lenders last year for their handling of the debt crisis that resulted from banks’ lending to speculators to buy stocks in companies traded on the NSE. The crisis was triggered by a slump in share prices.

 

Nigeria‘s economy, the second-biggest on the continent after South Africa, is expected to grow by 7.78 per cent in 2010, up from 6.96 per cent last year, driven by non-oil industries, such as agriculture, Sanusi said on September 21.

 

Growth is expected to reach 7.72 per cent in the third quarter and 8.19 per cent in the fourth quarter, compared with 7.69 per cent in the three months through June, he said.

 

Source: The Punch