Cablegate: Nigeria: Ex-Im Hears Positives On Financial Market
PP RUEHMA RUEHPA
DE RUEHUJA #2180/01 3100959
ZNR UUUUU ZZH
P 050959Z NOV 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4369
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHOS/AMCONSUL LAGOS 0210
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 ABUJA 002180
DEPARTMENT PASS TO USTR FOR AGAMA AND EXIM FOR JANIK, MILIAN AND
TREASURY FOR PETERS, RHALL
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3130/USFC/OIO/ANESA/DHARRIS
E.O. 12958: N/A
TAGS: EFIN ETRD ECON EINV PGOV NI
SUBJECT: NIGERIA: EX-IM HEARS POSITIVES ON FINANCIAL MARKET
REF: Lagos 426
1. (SBU) Summary. Nigerian bank regulators are confident that the
current global financial crises will have little effect on the local
financial system. They state that the current decline in market
capitalization is a market correction and are taking measures to
ensure that the correction does not become a crisis. Their optimism
may lead to delays in taking corrective action if they are mistaken.
2. (SBU) On October 20, U.S. Export-Import Bank officials Katherine
Janik, Mauricio Milian, and Kyle Jackson, and EconOff and EconSpec
met with Nigerian financial system regulators for a briefing on the
current market environment and effects the global financial crisis
may have on the local financial system. EXIM met with Nigerian
Securities and Exchange Commission (SEC), Nigerian Deposit Insurance
Corporation (NDIC) and Central Bank of Nigeria (CBN) officials in
Abuja. EXIM interest in the Nigerian financial market is high
because EXIM offers a range of financing solutions for U.S.
exporters and Nigerian buyers to expand trade between the United
States and Nigeria.
Securities and Exchange Commission
3. (SBU) SEC Director General Musa Al-Faki claimed that the recent
capital market downturn is a natural market correction and is not
linked to the current global financial crisis. Since February 2008,
market capitalization declined from 12 trillion naira ($102 billion)
to nine trillion naira ($76 billion) by the end of October 2008.
The SEC DG asserted the current downturn led to excessive panic
among the public which resulted in selling and falling stock prices.
4. (SBU) Al-Faki reported that measures have been taken to curb the
current downturn, such as the recent approval for a share buy back
by publicly traded companies, a 50 percent reduction in transaction
fees, and the introduction of regulations for licensing market
makers. The SEC is also working with the Nigerian Stock Exchange
and other market participants to educate the public on the capital
market and the nature of various instruments traded. The SEC hopes
that with such measures market confidence will be regained.
Nigerian Deposit Insurance Corporation
5. (SBU) NDIC Managing Director and Chief Executive Officer Ganiyu
Ogunleye said that the current global financial crisis has had no
effect on the Nigerian financial system. He stated that the NDIC
and CBN are collaborating to ensure that banks are adequately
supervised because they are exposed to risks in the market and
account for 65 percent of total market capitalization. Ogunleye
confirmed that the CBN is taking proactive measures, such as
granting regulatory forbearance for banks up to December 2009 to
restructure their margin facilities.
6. (SBU) Ogunleye expressed concern about banks' ability to sustain
growth without focusing on training personnel and stressed the need
for capacity building in the banking sector. Some banks have fully
functional training schools and programs for their employees, while
others prefer to attract already trained workers from other banks.
He advised that such a strategy is not sustainable in the long run
and due to rapid growth in the banking system banks are having
difficulties employing knowledgeable employees.
7. (SBU) CBN Deputy Director of Banking Supervision Charles Akoroda
said that the current global financial crisis has not had any effect
on Nigerian banks, and banks' liquidity positions remain very
strong. The CBN continues to monitor liquidity and deposit trends
on a daily basis. In addition, he informed the delegation that the
market is forcing a possible bank merger which will reduce number of
banks to 23. (Comment: Merger could be between PHB and Spring Bank.
8. (SBU) Akoroda opined that the banking system has grown
"remarkably" since consolidation in 2005, and banks are expanding
their operations locally and abroad. He said an area of potential
improvement is better supervision and starting in 2009 the CBN will
place CBN examiners in all banks to monitor daily bank activities,
thereby no longer relying on bank drafted reports.
ABUJA 00002180 002 OF 002
9. (SBU) Nigerian financial market regulators are in agreement that
the current global financial crises will have little to no effect on
the local financial system. They dismiss the steep drop in the
stock exchange as only a market correction and not a symptom of
larger problems. Sector experts are skeptical of financial reports
and the existing loopholes in reporting call into question how true
bank reports are and whether they accurately demonstrate banks'
financial health. These concerns are a potential area of trouble.
Banking sectors experts have told us separately that foreign
investors have pulled all their equity holdings from the Nigerian
stock market, not out of concern about economic and financial
conditions in Nigeria, but because they needed the funds back in
10. (U) This message was coordinated with ConGen Lagos. EXIM
visitors did not have an opportunity to clear this message before