Open Banks

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…“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.”- FT
Is this a laudable rponouncement? It depends on who you ask. While lifting the 10% cap on foreign ownership may increase the confidence of foreign investors and subsequently capital inflow into these major banks, the converse is also true.
I see this move as  a bit too drastic and reactionary and it may end up being counter-productive. Long term investors think long term,  rhetoric that seem to be lost on the policy makers. Who knows what the next-Gov. will choose to do. A policy of new leadership resulting in a drastic overhaul, attracts the shady kind of foreign investment developing economies ought to avoid. A key lesson learned from the global financial crisis is that all foreign investments are not created equal.
The lack of confidence in financial systems right now is not a result of the limited stake of foreign banks in the Nigerian banking sector. It is pervasive in the global financial system. Regardless of their part in the global meltdown all financial institutions are viewed through the lens of the global recession. Only time will heal these wounds.
Ever wondered why Nigeria always seem to attract oppourtunistic capital?

This entry was posted on Monday, June 22nd, 2009 at 9:20 AM and is filed under Economics, business. You can follow any comments to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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