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 Daily
Independent Online.
* Wednesday, June 16, 2004.
Why merger, acquisition are
unpopular in Nigeria, by Soludo
By Sanya
Adejokun,
Senior Correspondent, Abuja
Governor
of the Central Bank of Nigeria (CBN), Professor Charles Soludo, has
identified the desire by Nigerian businessmen to solely own businesses as
the reason for the slow pace of mergers and acquisitions in the country.
Soludo, who spoke at the10th
annual seminar of the Financial Institutions Training Centre on Tuesday
in Abuja, said the culture of ‘not letting go’ has contributed largely to
the unpopularity of the idea of mergers and acquisitions.
Observing
that “there had been only a little over 20 cases of mergers and
acquisitions in Nigeria,” the CBN governor said, “There is the general
tendency of Nigerians to solely own businesses and avoid, by all means,
the dilution of ownership.” He pointed out that the development was
responsible for the poor rate of mergers and acquisitions.
The former
economic adviser to the president stated that this tendency to hold tight
to the ownership of businesses, has led to the liquidation of some banks,
which otherwise could have been saved.
According to
him, Nigerian banking system was dominated by “small players,” which are
usually prone to crisis and are largely uncompetitive because of their
inability to take advantage of the economies of scales because of their
small sizes.
Elaborating
on the importance of large businesses to planning, Soludo explained that
monetary policy for instance was better achieved through significant
players, rather than motley of institutions many of which were
financially weak and fragile.
He also
stressed the importance of consolidation in the nation’s banking system,
which he observed could only be achieved through mergers and
acquisitions, saying this has great implications for monetary policy,
financial risk and the payment system.
In his words,
consolidation in the system would “improve the effectiveness of credit
and liquidity risk controls by increasing the institution’s ability to
net internal payment flows or get a more comprehensive picture of
settlement exposures.”
Speaking
earlier, the Director - General of FITC, Dr. Oladimeji Alo, had told the
gathering that the centre has started collaborating with reputable
institutions to boost capacity in the financial services sector and the
economy as a whole.
Already, the FITC, according to the director-general, has
successfully collaborated with such institutions as Euromoney EMEA
(London); Risk Analytics (United States); Midrib Inc. (USA); the West
African Bankers’ Association (WABA); ACL Services (Canada); and the
African Centre for Advanced Studies in Management (CESAG), Senegal.
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