Eurozone: Foreign partners starve Nigerian banks of credit

The crisis in the eurozone has continued to take its toll on Nigerian banks as their international counterparts have cut down credit lines given to them.

Our correspondent gathered from senior officials in the banking sector that various local banks had been rejected credit lines recently by their foreign counterparts as the latter continued to embark on contraction measures as advised by the International Monetary Fund.

Credit line is an arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified period of time.

Senior banking officials told our correspondent that the European banks had further reduced their risk exposure, thereby disapproving proposals from banks all over the world, especially those from Africa.

One of the bankers, who did not want his name mentioned, said, “Foreign banks are cutting down on their expenses massively. They have further cut down their lines of credit to smaller banks. It is part of the measures and advices given to them by the IMF.

“It is not new that European banks have reduced their lines of credit to banks in Nigeria. In 2011, they were still granting these lines depending on the project and proposals. But since 2012, they have cut down seriously on the lines.”

Nigerian banks have over the years established relationships with their foreign counterparts for mutual assistance in the areas of credit lines, technical and information technology, among others.

The credit lines, which also represent money used by the foreign correspondent banks to help the local banks settle foreign currency denominated trade transactions to customers, are usually recalled gradually.

But following the global financial crisis, many foreign credit lines have either been cancelled or recalled due to the growing pressures on the foreign banks to meet their financial obligations to their customers.

Some of the correspondent banks, which Nigerian banks have relationship with are, Deutsche Bank, Barclays Plc, HSBC Holdings, Royal Bank of Scotland Group, BNP Paribas, Lloyds Banking Group, UBS AG, Credit Suisse Group, ANZ Commerzbank, and ING of Belgium, among others.

Another senior banker, who pleaded anonymity, told our correspondent that while Nigerian banks had recovered from the global credit squeeze, some of the foreign correspondent banks were still mired in the mess.

“It’s very hard to get a credit line from a foreign bank now. All Euro countries have resulted to tightening monetary policies. In the same way, the banks have reduced their loans and credit lines,” he said.

The Managing Director, Sotice Investment Company Limited, Mr. Adedayo Toluwase, said the austerity measures that started a couple of years back would likely continue till 2014.

He added, “The European countries are pursuing austerity measures, which will definitely make foreign banks cut down their credit lines to Nigerian banks. It is going to affect some developmental projects because most of the credit lines come from Europe. “And if there will be tightening in their activities, it will also affect Nigerian banks getting lines from them.”

Speaking in the same vein, the Chief Executive Officer, Fatrax Securities Company Limited, Dr. Wale Ositelu, said the ability of Nigerian banks to mobilise foreign credit had reduced due to crises in the Eurozone.

“The credit lines are not as visible as they were before. The Euro crisis has affected them. Apart from the Euro crisis, some of the banks have defaulted in servicing their credit lines. Hence, the banks want to reduce their risk exposure.”

[Punch]

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One Comment

1. 

   AMBROSE MADUFORO

   April 26, 2013 at 8:14 pm

   The era of deceit is over , every public office holder shall declare his or her asset and provide us with source of his earning as it here and in most transperant societies and I shall be first to do . We have to be mindful of any form of corporate conspiracy.