March 15, 2006/businessday
Negotiations intense as global institutions eye external reserves. Zenith Bank, UBA, First Bank, GTBank and Access Bank are being courted by foreign financial institutions, seeking to manage the nation\'s growing external reserves.
This has been disclosed to BUSINESSDAY by sources within the industry. Negotiations have become intense as Central Bank of Nigeria (CBN) prepares to announce the names of global custodians that will manage the reserves next week.
Leading banks that are pursuing deals include JP Morgan, Goldman Sachs, UBS, CitiBank and Standard Bank of UK. Under the new rules set by the CBN for managing the nation\'s reserves, these banks must pick up equity stakes in a local bank.
This requirement has forced many of them to start negotiating with the local banks. JP Morgan is reported to have already signed a memorandum of understanding with Zenith Bank, which will see it pick equity stakes. Goldman Sachs is negotiating with Guaranty Trust Bank. UBS is eyeing UBA while another bank in the Netherlands is reportedly talking to Access Bank. CitiBank and Standard Bank already have local subsidiaries. Sources close to the CBN say the apex bank sees these foreign banks as picking up equity stakes of up to 40%.
Industry sources say the CBN has two main reasons for pursuing this policy. The first is to make the global institutions mentor Nigerian banks into becoming global players within the shortest possible time. CBN Governor Charles Soludo has expressed his desire to see Nigerian banks rank among the top 50 in the world by 2010. The ultimate desire is to see Nigeria becoming Africa\'s financial hub.
Also, it is hoped that foreign investment will be attracted to Nigeria\'s non-oil sector. The consolidation exercise attracted more than $600 million in foreign investments. The apex bank hopes this policy will attract more. Nigeria\'s external reserves, which were in excess of $30 billion in January, are expected to be $40 billion by the close of this year.