AMBASSADOR MEETS WITH FIRSTBANK IN LAGOS

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000490

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DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ANESA/REED

E.O. 12958: DECL: 12/30/2019
TAGS: EFIN ECON PGOV NI
SUBJECT: AMBASSADOR MEETS WITH FIRSTBANK IN LAGOS

Classified By: CG Donna Blair for reasons 1.4 (b & d)


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SUMMARY
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1. (C) FirstBank new CEO Onasanya briefed U.S. Mission on
December 21 on the outcomes of the recent Central Bank
retreat on banking and economic growth issues. With the
audits completed, the banks are now focusing on
consolidations and mergers with an emphasis on encouraging
foreign banks to invest and freeing up credit for
agriculture. Onasanya was hopeful that the Asset Management
Company Bill, to manage the toxic assets of the banks, will
pass the National Assembly in early 2010. Ambassador noted
that President Yar A,dua,s illness brings with it the
expectation for Nigeria to follow their constitutional
responsibilities. She also mentioned that American
companies are interested in Nigeria but their fear of lack of
sanctity of contract, and legislation such as local content
and PIB hinders trade and investment. END SUMMARY


2. (C) Ambassador Sanders met with First Bank Managing
Director Stephan Olabisi Onasanya on December 21 (Econoff was
notetaker). Onasanya briefed the Ambassador on the recent
banking retreat in Enugu with the Central Bank of Nigeria
(CBN) during the weekend of December 12-13. The discussion
in Enugu focused on what banking can do to help develop the
Nigerian economy, specifically in Agriculture and
Manufacturing. There is talent in the Agriculture sector
yet no collateral to leverage and therefore no credit is
extended. The Land Use Act must be reformed along with
other legal reforms to allow the private sector to grow and
thrive. Freeing up credit for manufacturers was discussed
with Agriculture being the primary sector for bankers to
focus on.

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THE WORST IS OVER, MERGERS LIE AHEAD
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3. (C) The Ambassador asked Onasanya whether there were
more reforms to come? FirstBank Executive Director Aleck
Otti stated that the worst was over. The focus is now on
consolidations, including mergers with foreign banks, with
all audits having been completed. The bigger the banks the
better they can withstand shocks in the future according to
Otti. (NOTE: CBN Governor Sanusi has been wary of creating
banks that are &too big to fail.8 END NOTE) The eight
banks that did not pass the audit (Afribank, BankPHB,
Equatorial Trust, FinBank, Intercontinental, Oceanic, Union
Bank, and Wema) will be the first banks on the table. Otti
continued by stating that Sanusi,s goal of 15 banks is more
speculation than anything else. The Ambassador went on to
ask about reports of the new management at the eight banks
not doing a good job and actually causing more trouble.
Onasanya replied that you must keep things in perspective.
&The owners that were kicked out of their banks are not
going to go quietly. They will fight to pull down the
CBN.8 You must take such reports with &a grain of salt8
Onasanya stated.


4. (C) Onasanya continued in saying that some banks must be
absorbed in order to stand on their own. Corporate
governance must be strengthened for re-capitalization to
work. Otherwise the second tier capital that was put into
the eight banks by the CBN will be for naught. As for the
banks that scaled the audit, Onasanya wondered whether they
could stand alone? He felt that even these banks would want
to be absorbed into larger banks. FIrstBank is currently
looking for deals that will &add value8 according to
Onasanya.

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ASSET MANAGEMENT COMPANY BILL
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5. (C) The Ambassador asked Onasanya whether the Asset
Management Bill (AMC) will pass this year. Onasanya shared
Sanusi,s comments from the Enugu retreat where Sanusi
assured the bankers that the bill is not yet presented in the

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House nor the Senate and still needs to go through the
Attorney General,s office. Otti was hopeful that the bill
will pass early 2010. Onasanya added that it was imperative
to pass the AMC in order for the banks to be merged or bought
outright. &The success of the AMC is critical8 according
to Onasanya.


6. (C) The Ambassador followed up stating that there were
more bills pending and of interest to the United States,
including the Petroleum Industry Bill and the Local Content
Bill, along with the AMC. In needing executive leadership
to pass these bills the Ambassador conveyed her best wishes
for the quick recovery of President Yar A,dua and stated her
concern for the Nigerian banks that have been at the
forefront of the economy. &Where does the sector go from
here8 the Ambassador wondered? &How will the banks come
out of this going into 2010?8 The Ambassador stated that
she has spoken with CBN Governor Sanusi and that agriculture
and banking were the two biggest concerns of the Governor.

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POLITICAL IMPACT OF THE PRESIDENT
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7. (C) Onasanya took the initiative to ask the Ambassador
about the political impact of the President being ill for
the past 4 weeks. The Ambassador answered that Mission
Nigeria is getting mixed information, including that he is
doing very badly or currently doing better. The United
States is concerned and is talking to all its interlocutors.
The speedy recovery of the President is the top priority
for now along with allowing the Constitutional processes to
be followed. Onasanya joked if the Ambassador meant the
People,s Democratic Party (PDP) Constitution. (NOTE: The
PDP is the current ruling party of Nigeria END NOTE) The
Ambassador assured Onasanya that she meant the Constitution
of the Federal Government of Nigeria as that is the rule of
law document of the land. She followed up by stating that
the United State,s policy position was that responsibility
and authority follows the constitution. The Ambassador
noted that the USG is telling all interlocutors that they
must follow the constitution and that the United States is
counting on Nigeria to do the right thing.

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WHERE ARE THE AMERICAN BANKS?
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8. (C) Onasanya continued his questions by asking why
American banks had disappeared from Nigeria? Chase bank
used to be in Nigeria but no more, why was this? The
Ambassador countered by explaining that the fears of the U.S.
businesses were higher than their interests. This was not
to say that there is no interest in Nigeria. There is ample
interest. To buttress her argument the Ambassador cited the
lack of transparency and sanctity of contract. Without
giving their names, she gave the example of two U.S.
companies this year in Nigeria that have had major sanctity
of contract issues and are not being treated in a transparent
way. This does not encourage more investment. Couple this
issue with the recent Petroleum Industry Bill (PIB) and Local
Content Bill before the National Assembly makes the
environment not inviting for U.S. businesses as &private
industry talks to private industry8 at the end of the day,
stated the Ambassador. Since August the PIB has gotten
better due to ongoing dialogue between the oil companies and
the GON. If the AMC is passed that will possibly attract the
interests of some U.S. Banks to come to Nigeria.
BLAIR