South African financial services provider, FirstRand is considering buying either of two Nigerian banks, Mainstreet or Keystone bank, as growth slows in its local market.
Problems including widening gap between rich and poor, high unemployment rate, corruption, deteriorating infrastructure, etc., have surged growth in the Southern African country over the years.
“We are growing into commercial banking in Nigeria,” said Sizwe Nxasana, CEO of FirstRand in an interview.
The bank will start commercial banking in Nigeria with its merchant banking license. “We will scale it up,” Nxasana said.
FirstRand started operations in Nigeria last year, with its investment banking unit, Rand Merchant Bank, which had since worked with the commercial division of FirstRand’s retail business to find corporate clients in the most populous black nation.
The South African Reserve Bank (SARB) had in January raised interest rate to 5.5 percent, in an effort to curb inflation which is expected to hit 6.3 percent in 2014, and also shore up the rand, which lost nearly 25 percent of its value last year. This has discouraged potential borrowers and reduced spending.
FirstRand seeks to grow its investment in Nigeria and exploit the abounding opportunities in Africa’s second largest economy, prompting it to signify interest in acquiring one of Nigeria’s nationalised banks taken over and recapitalised by the Asset Management Company of Nigeria (AMCON) in 2011 following mismanagement of bad loans.
AMCON had subsequently put three banks up for sale. Out of the three, the asset management company had said Enterprise Bank would be sold first, followed by Keystone and Mainstreet Banks – both of interest to FirstRand.
“We must make sure that whoever takes over these banks, ultimately, is fit and proper to run a bank. We must know where their money is coming from and we must know that the management is going to be sound,” AMCON’s Chief Executive Officer, Mustapha Chike-Obi.
FirstRand will be hoping its global reputation serves as an advantage in its acquisition push.
As at Thursday, the JSE-listed company stock dropped 0.57 percent to 3,479 rands ($326).