Banks holding out against foreign buyers

The stock market is suddenly back on positive territory after more than a year in the negative zone. Stocks are suddenly enjoying a boom again as foreign investors sneak back into the country through the new investors and exporters window opened for them by the Central Bank of Nigeria (CBN).

 The window, which makes it possible for investors to come into the Nigerian market at rates now even lower than the exchange rates in the black market, has made it very attractive for foreign investors to renew their interest in buying equity stakes in Nigerian banks.

 So where the foreign investors needed say US$ 100 million to buy equity stakes in Nigerian banks two years ago, it can now bring in US$50 million and still buy the same amount of stakes in the bank because the naira has weakened by that much within the period.

 Thus the cost of buying equity stakes in Nigerian banks or companies has declined by at least 50 percent in the last two years due to the fall in the value of the naira. In fact, sources in the financial sector, say valuations of Nigerian companies have never been this cheap.

 The cheap valuations mean some foreign investors are now eager to buy into the Nigerian banking industry on the cheap but some banks are resisting the urge to sell even when it is obvious that they need a fresh injection of capital to guarantee their survival. But the owners of the banks are holding back, hoping that their valuations will improve, so that they can get better deal for their stakes. However, there are indications that some deals may be done soon with the positive outlook for the Nigerian economy and banking industry. There are also banks that need urgent recapitalization and cannot and just want a good deal.