Search

 

Cablegate: Citibank Nigeria: Contract Enforcement Constrains Lending.

VZCZCXYZ0013
RR RUEHWEB

DE RUEHOS #0727 3111513
ZNR UUUUU ZZH
R 071513Z NOV 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 9570
INFO RUEHUJA/AMEMBASSY ABUJA 9327
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS LAGOS 000727

SIPDIS

SIPDIS

STATE PASS TO EXIM

E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL NI
SUBJECT: CITIBANK NIGERIA: CONTRACT ENFORCEMENT CONSTRAINS LENDING.


1. (U) Summary: Citibank, the only U.S. bank operating in Nigeria,
believes corporate lending is constrained by difficulty in enforcing
contracts. Retail banks have difficulty verifying customers'
identity and credit worthiness; to get around these problems, they
lend to civil servants and employees of large companies. As the
middle class expands, credit bureaus and a national identification
system will help others get access to credit. End summary.

--------------------------------------------- -
Lack of Contract Enforcement, Credit Histories Constrain Lending
--------------------------------------------- -

2. (U) Citibank identified non-enforcement of contracts is a major
problem facing the Nigerian banking sector, Emeka Emuwa, Managing
Director (MD), Citibank Nigeria told Econoffs. Even banks, such as
Citibank, which do corporate lending in Nigeria, are constrained by
the huge cost and length of time it takes to seek redress for a
breach of contract. At the retail banking level, banks have
difficulty identifying creditworthy individuals. This has greatly
limited banks' consumer financing programs to mostly civil servants
and employees of large companies. Though Citibank does no retail or
consumer banking, contract enforcement is a major challenge, Emuwa
said. Other obstacles to doing business, including the country's
erratic electric power supply and low manpower quality, have
increased Citibank's cost of operating in Nigeria.

--------------------------------------------- ------
Banks Lure Expanding Middle Class with New Products
--------------------------------------------- ------

3. (U) The lower age of cars now driven by Nigerians is an
indication that the middle class is growing, Emuwa said. Nigerians
now purchase more recent, albeit used, cars than they previously
did. Also, more sophisticated roofing sheets and better quality
tiles are being used in buildings where previously very basic items
were all people could afford. This, plus the intense interest in the
stock market, he said, is a clear indicator that the Nigerian middle
class is expanding.

4. (U) Banks are developing new consumer products to exploit this
growth. Private credit bureaus are springing up and will help some
of these potential borrowers establish credit histories. Currently,
large percentages of Nigeria's population are employed in the
informal economy, and have no fixed income, let alone a credit
history. In addition, Emuwa believes the introduction of the
proposed national identification system will also help to expand the
pool of borrowers.
--------------------------------------------- ------
Recap Brings Citi Nigeria to Full Subsidiary Status
--------------------------------------------- ------

5. (U) With 82 percent American capital, Nigeria International Bank
- Citibank, is the only U.S. bank and with the UK's Standard
Chartered Bank, one of only two international banks in Nigeria.
Citibank has a large corporate banking operation with a clientele of
multinational, regional, local and public sector companies. The bank
recapitalized from USD 100 million to USD 200 million in 2005, in
line with the Central Bank of Nigeria's directive to all banks to
recapitalize to 25 billion naira (USD 192 million). With the
addition of new U.S. capital, Nigeria International Bank Citibank
became a full subsidiary of Citibank.

6. (U) Recapitalization of the banking sector is unlikely to cause
the economy to overheat. Emuwa is carefully watching increases in
government spending which he believes have the potential to cause
overheating. Recent Central Bank Governor Soludo's comments about
foreign banks entering the market have been misinterpreted,
according to Emuwa. The Governor said only that he would not allow a
foreign bank to take over any of Nigeria's ten largest banks. He did
not, Emuwa stressed, bar foreign banks from taking an equity
interest in Nigerian banks.

Hutchinson

© Scoop Media

 
 
 
World Headlines

 

UN Rights Office On Syria: The “Monstrous Annihilation” Of Eastern Ghouta

Since the Syrian Government and their allies escalated their offensive against opposition-held Eastern Ghouta on 4 February, there have been more than 1,200 civilian casualties, including at least 346 killed and 878 injured, mostly in airstrikes hitting residential areas... Ninety-two of these civilian deaths allegedly occurred in just one 13-hour period on Monday. More>>

ALSO:

Cyclone Gita: 70% Of Tonga Population Affected

The full scale of destruction is beginning to emerge from Tonga in the aftermath of the severe tropical cyclone Gita. Around 50,000 people, or almost 70% of the country’s population, have been affected, a third of whom are children. More>>

ALSO:


Gita: Samoas Clean Up After Being Swamped By Cyclone

Apia in the wake of Gita Photo: Rudy Bartley The clean up is continuing in the two Samoas after Tropical Cyclone Gita hit on Saturday morning. More>>

ALSO:

Grand Coalition : Germany's two main political parties set to govern under Angela Merkel.

The liberal-conservative Christian Democratic Union (CDU) and the centre-left Social Democrats (SPD) negotiated through the night in a marathon final push to nail down an agreement. More>>


80 Passengers: Kiribati Ferry Disaster

The United Nations Children’s Fund (UNICEF) and the World Health Organization (WHO) are working with the Government of Kiribati to support children, families and communities affected by the recent Butiraoi ferry disaster. More>>

ALSO:

Campbell On: the US demonising of Iran

Satan may not exist, but the Evil One has always been a handy tool for priests and politicians alike. Currently, Iran is the latest bogey conjured up by Washington to (a) justify its foreign policy interventions and (b) distract attention from its foreign policy failures. More

ALSO: