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Cablegate: Banking Sector Expands; Private Equity "Does" Development

VZCZCXRO9476
PP RUEHMA RUEHPA
DE RUEHOS #0549/01 2141536
ZNR UUUUU ZZH
P 021536Z AUG 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC PRIORITY 9292
INFO RUEHUJA/AMEMBASSY ABUJA 9082
RUEHWR/AMEMBASSY WARSAW 0481
RUEHCD/AMCONSUL CIUDAD JUAREZ 0460
RUEHIT/AMCONSUL ISTANBUL 0459
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000549

SIPDIS

SIPDIS

SENSITIVE

DEPT PLEASE PASS TO USTR; OPIC FOR JAMES WILLIAMS; USTDA FOR PIERCE
DAVIS

E.O. 12958: N/A
TAGS: ECON PGOV EINV PREL NI
SUBJECT: BANKING SECTOR EXPANDS; PRIVATE EQUITY "DOES" DEVELOPMENT


LAGOS 00000549 001.2 OF 002


1. On July 17, Trina Rand, International Economist, and Michael
Ruffner, Director, Office of Technical Assistance, U.S. Department
of Treasury, met with a series of representatives of the financial
sector to discuss macroeconomic health and developments in the
banking sector since consolidation. Consumer banking was expanding
to middle- and lower-income populations. Private equity funds were
increasingly used as a source of capital for infrastructure
development projects. End summary.

---------------------------------------------
Banks Are Healthy; Expand Consumer Activities
---------------------------------------------

2. Henry Semenitari, Executive Director, Commercial Banking, First
City Monument Bank (FCMB) and Ebenezer Olufowose, Executive
Director, Investment Banking, Access Bank, underscored the progress
in the banking industry as a result of consolidation. The regulatory
system had grown more specialized and banks were able to focus on
their core competencies. New partnerships and alliances with
offshore banks had allowed local banks to gain expertise from their
foreign partners. In a subsequent meeting, Osaze Osifo, Chief
Executive Officer (CEO), Travant Capital, said there was almost a
guarantee banks would succeed because they were now too big to fail.
Osifo praised Central Bank of Nigeria (CBN) Governor Charles Soludo
on the way consolidation had been regulated.

3. With increased capital, banks were expanding their consumer
activities. One area of growth for FCMB has been the housing sector.
FCMB launched a major project financing and home mortgage scheme in
collaboration with the U.S. Overseas Private Investment Corporation
(septel). Banks were also supporting local industries such as
housing construction and oil services companies. Consumer banking
would continue to expand, said Semenitari. A catalyst for this would
be Credit Registry, Nigeria's first private credit bureau, which was
established with the participation of a consortium of banks.

4. Semenitari said consumer banking was aimed at previously
disenfranchised segments of the population. (Note: The International
Finance Corporation estimated that less than 20 percent of the
population has access to a bank account). For example, banks were
now specializing in auto loans. Semenitari and Olufowose emphasized
this process was market-driven. Banks would continue to consolidate,
and they expected Nigeria could ultimately support 14 large banks.
(Note: In an Abuja meeting with Trina Rand and Michael Ruffner,
Central Bank of Nigeria Governor Soludo said future changes in the
banking sector would be market-driven).

--------------------------------
Banks Need More Skilled Managers
--------------------------------

6. Due to the changes in the sector, banks were suffering from a
lack of staff with the requisite skills to manage fund pools. Banks
had established training schools to address this and were getting
involved in setting curricula in primary and secondary schools. They
would also focus on business and economic departments at a number of
universities to create "centers of excellence". Osifo said Travant
Capital was investing in schools, following the model of the African
Leadership Academy, a pan-African secondary institution outside of
Johannesburg.

---------------------------------------------
Private Equity And Infrastructure Development
---------------------------------------------

7. Osifo discussed Travant Capital, a private equity arm of Oando
Holdings. Travant was in the process of raising USD 300 million for
its first private equity fund. With a focus on West and Central
Africa, Travant would invest in growth, consolidation, and
efficiency improvement opportunities in the energy, financial
services, transportation, logistics and telecommunications sectors.
Of particular interest to Osifo in Nigeria were energy and
transportation, as these were the greatest impediments to economic
development.

8. The representatives discussed the Africa Finance Corporation
(AFC), recently established by the CBN as a complement to the

LAGOS 00000549 002.2 OF 002


African Development Bank. Olufowose said Access Bank had invested
USD 20 million in the AFC. The Corporation would drive
profit-oriented development projects in Africa, focusing on
infrastructure and long-term projects. According to an information
memorandum issued by the CBN, the authorized share capital for the
AFC was USD two billion. A private placement was expected to yield
USD one billion, 700 million of which was invested by Nigerian
banks. Investment in the AFC would be eligible for tax exemptions,
market entry formalities and regulatory requirements. Olufowose said
Access Bank had invested USD 200 million and was optimistic about
the AFC's impact on the development of infrastructure in Africa.
Osifo was less sanguine, saying banks had been cajoled into
investing in the Corporation.

10. Asked how the U.S. government could assist Nigeria, Osifo said
the West should not provide aid. Rather, other models of development
assistance had already proved more effective in other areas of the
world, such as microfinance schemes. He emphasized the West needed
to reevaluate local needs if it meant to keep pace with Chinese
investment in Nigeria.

11. Trina Rand and Michael Ruffner cleared this cable.

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