Shake-up leads to opportunities in Nigerian Banking

It was a long time coming, but the shake-up in the Nigerian banking sector has been comprehensive. The audit carried out by the new Governor of the Central Bank of Nigeria, Lamido Sanusi, has resulted in five banks being declared technically insolvent, with a further four declared to be facing a grave liquidity crisis.

The senior management teams of eight banks have been summarily dismissed, accused of poor corporate governance, lax credit control procedures and poor credit risk management practices. Several previously powerful executives have been arrested. Billions of dollars have been injected to recapitalise institutions at risk. Sanusi's short-term objective was averting a major banking crisis, while his more ambitious long-term goal is restoring confidence in Nigeria's banking sector and bringing it into line with international best practice.

But despite the sacking of entire management teams, there is no dire need of experienced banking executives in Nigeria, experts say, because the sector was heavily overstaffed and once the reform is over there will be less banks and therefore less jobs to go round. "After the first wave of consolidation, expatriate Nigerian bankers came back in droves from the UK and the US," says David Cowan, CitiBank's Africa economist. "There are too many layers of senior management now and there will definitely be more consolidation in the sector: we expect the total number of banks to shrink to 13." Sanusi's predecessor, Chukwuma Soludo, had already pruned the number of banks from 89 to 25.

"There is no shortage of capable Nigerian bankers at executive level," agrees Razia Khan, Standard Chartered Bank's head of research for Africa. "But certain sectors like risk management functions and compliance need to be re-staffed, so a recruitment drive in those areas is very likely."

Another of Sanusi's significant reforms is the compulsory adoption of more stringent international reporting standards, which opens a whole new chapter in Nigeria. New year-end financial reporting regulations and new compliancy requirements mean that all the banks will need to take on more staff to meet additional transparency standards.

"The major problem is at accountancy level," says Cowan. "There are massive capacity constraints, to the point that I don't even know how the Central Bank managed to do the audit. This is where the real opportunities are."