All foreign banks that wish to merge or acquire a local bank existing in Nigeria must have operated in Nigeria for five years, established branches in at least two-thirds of the states in Nigeria, excluding Abuja, and are not expected to have more than 40 percent of total shareholding, says the Central Bank of Nigeria (CBN’s) new guidelines on entry of foreign banks into Nigeria.

In addition, the policy states that the existing shareholding structure of Nigerian banks in which there are foreign interests in excess of 10 percent might subsist but such foreign interests should not exceed the current level, and that such a bank would have operated in the country for not less than five years.

Apart from addressing the inclination of foreign banks to maintain presence in only a few commercial centres, the guidelines also represent an attempt to reinforce CBN’s policy to shield banks with large branch network from foreign dominance.

"Recent experience shows that foreign banks have been reluctant to expand branches across the country and operate only in few metropolitan cities. Again, the structure of their loan portfolio indicates concentration in favour of multinationals," Festus Odoko, CBN’s spokesman said.

He said, obviously, such behaviour does not augur well for a country desirous of improving the banking density (reach out to the unbanked) and to improve the payment system of the country.

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He said this became rife with the comment made by the Mayor of London, Alderman Lewis, who alleged that Nigeria is not opening up its banking system to foreign competition during his recent visit to the country.

Odoko, in the statement made available to Business Day, said "from the above, it is obvious that the bank is acting in the interest of all stakeholders particularly in view of the critical link between ownership and control of commercial banks and economic development.

CBN’s position has been that foreign banks and/or investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of N25 billion and other applicable regulatory requirements for banking licence as prescribed by the CBN.

The guidelines specify that such foreign individuals or institutional investors could also invest in existing Nigerian banks. There is however, a condition that no single foreign individual/institutional investor should acquire more than the share of the single largest Nigerian individual/institutional investor in any bank, provided the aggregate shareholding of the foreign investors do not exceed 10 percent of the total capital of the bank.

Odoko said what is clear is that the CBN just as in other jurisdictions put in place certain conditions under which prospective foreign banks/investors could invest in this strategic sector taking into consideration certain antecedents associated with the Nigerian situation.

"There is however, a condition that no single foreign individual/institutional investor should acquire more than the share of the single largest Nigerian individual/institutional investor in any bank, provided the aggregate shareholding of the foreign investors do not exceed 10 percent of the total capital of the bank," said Odoko.

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