Nigeria may take banks into temporary state ownership to
stop them collapsing, its finance minister has said.
We will consider government ownership as an interim
arrangement until the time they are able to get buyers,
Mansur Mokhtar told Emerging Markets in Istanbul.
He insisted that this would be an interim
arrangement to avoid the collapse of at least nine
troubled banks, including some of the largest of the country.
Mokhtar added that he would top short of nationalizing the
We are also encouraging mergers and acquisitions, and
this [government ownership] would be as a last resort, if we
are not able to attract foreign or local capital, Mokhtar
said in an interview.
The establishment of a dedicated asset management
company to clean up banks portfolio is also part of the Abuja
governments arsenal, he said.
Lamido Sanusi, Nigerias central bank governor, said in
an interview with Emerging Markets: We have done
stage two. We now have to build on it.
Sanusi, who was appointed in June, has acted swiftly to
remove the chief executive officers of five large banks and
ordered an audit in their books. These five institutions
accounted for more than 80% of non performing loans, he
The average non performing loan ratio is around 40% of
assets, according to Sanusi. A large number of banks were
heavily exposed to the oil and stock markets before the global
financial crisis erupted last year.
Mokhtar commented: You had oil prices going up,
you had the asset bubble. Both were related. When oil price is
high, there is a lot of liquidity in the Nigerian capital
market. A small number of banks took very large exposures in
these sectors, which were heavily correlated. So you had an oil
price crash, a stock market crash, and that wiped out part of
The Nigerian central bank has enjoyed the support of the
international community, including the IMF and the African
Development Bank, for its banking sector reconstruction
Donald Kaberuka, AfDB president, said: Swift
action was taken by the central bank of Nigeria to deal with
the problem at the source. They have taken all the appropriate
Meanwhile, Mokhtar has acknowledged the difficulties of the
largest West African country to meet the financing gaps to meet
its infrastructure needs. Nigeria is now pushing for a $200
million loan from the AfDB, after receiving a $500 million
World Bank loan last month. Its previous attempts to tap the
international bond market failed as a consequence of the global
We will continue to count on these institutions to
provide support and technical assistance, especially in banking
sector regulation and supervision, Mokhtar said.