Financial Sector Assessment Program : Nigeria - Banking Cross-Border Issues
The introduction of new much higher minimum capital requirements and the subsequent banking sector consolidation created a platform for Nigerian banks to expand within the region and more globally. After capitalization, several Nigerian banks found...
| Main Authors: | , |
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| Format: | Financial Sector Assessment Program (FSAP) |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/05/18170455/nigeria-banking-cross-border-issues-technical-note http://hdl.handle.net/10986/15966 |
| Summary: | The introduction of new much higher
minimum capital requirements and the subsequent banking
sector consolidation created a platform for Nigerian banks
to expand within the region and more globally. After
capitalization, several Nigerian banks found themselves with
large amounts of capital while there was an environment of
uncertainty about the situation in Nigeria in the aftermath
of the 2009 Nigerian banking crisis. This together with new
market expansion opportunities gave an impulse to a number
of Nigerian banks to quickly expand within West and Central
Africa, as well as more globally. The global crisis itself
provided Nigerian banks with opportunities to expand within
Sub-Saharan Africa (SSA). With Nigerian banks' presence
in many countries in the region and more globally, the
Central Bank of Nigeria (CBN) needed to overhaul its
traditional supervisory practices and embark on rigorous
supervision of its banks on a consolidated basis taking into
account all their subsidiaries and branches abroad-a task
with which even advanced supervisors still struggle. This
note focuses on issues of cross-border coordination and
provides policy recommendations that could be taken into
consideration by the CBN. Section two provides a brief
description of the expansion and cross-border liquidity
flows of some Nigerian banks. Section three focuses on
issues related to supervisory cross-border coordination.
Section four offers some recommendations. Several Nigerian
banks have expanded abroad, primarily within West and
Central Africa over the recent years. Banks in Nigeria with
international activities have to maintain a Capital Adequacy
Ratio (CAR) of at least 15 percent, compared with the CAR
requirement of 10 percent for the other Nigerian banks. At
least two of those banks with headquarters in Nigeria have
subsidiaries across Africa and representative offices and/or
subsidiaries in Europe. One regional bank has headquarters
in Togo, while its main subsidiary with about 44 percent of
the total assets domiciles in Nigeria. Cross-border
liquidity flows of Nigerian banks fluctuated from month to
month in 2012, as Nigerian banks have been becoming more
active in the region. According to the CBN, initial
experiences have been encouraging, but it faces some serious
challenges in further strengthening of cross-border
supervision. A recent CBN circular issued in May 2012,
restricting Nigerian banks' capacity to capitalize
their foreign subsidiaries, will seem to be an unnecessary
restriction on an activity that will generally be managed
through the supervisory process. |
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