NIGERIA IS to lift a ban on foreign takeovers of its banks, breaking a decades-old legacy of protectionism to open Africa’s biggest untapped market for financial services to international competition.

Lamido Sanusi, the new governor of the Central Bank of Nigeria, said he would break with his predecessor’s aversion to foreign ownership by encouraging international banks to make acquisitions as part of a wider plan to bolster confidence in Nigeria’s financial system. The move raises the possibility international banks, most of whom fled after nationalisations under military rule in the 1970s, may return to snap up Nigerian banks with networks across West Africa as a bridgehead for wider expansion.

Mr Sanusi, a risk-management expert and former head of FirstBank of Nigeria, hopes foreign banks might provide infusions of capital and skills in return for stakes in local franchises that may otherwise struggle to survive the losses incurred during the collapse of the local stock market last year.

“We would try to encourage foreign banks that are coming, not just with money, but with management and systems, to come in and acquire,” he said. “Why wouldn’t I be comfortable with a bank owned by a Barclays or HSBC or China Construction Bank, who I know? For me, it’s a no-brainer.”

He pledged to impose tougher disclosure standards and move to quantify and tackle exposure to share-related loans, the biggest source of uncertainty for investors.

Foreign banks started leaving Nigeria after military rulers introduced a law in 1976 granting the state 60 per cent ownership. The sector has since been liberalised but only Standard Chartered and Citigroup have re-established sizeable operations.

Mr Sanusi said he would review a cap the central bank imposed on foreign ownership of local banks at 10 per cent following a 2007 merger deal that handed control of IBTC Chartered Bank in Lagos to Standard Bank of South Africa.

Several other European and US banks have established a limited presence but the cap bans them from acquiring controlling stakes.

There is no law against foreign takeovers of banks, meaning the decision to allow them rests with the governor. – (Copyright The Financial Times Limited 2009)