Challenges of Foreign Banks in Nigeria

Topics: Investment, Bank, Economics Pages: 6 (1696 words) Published: September 2, 2008
Firstly, since independence in 1960, the Nigerian political system has been volatile, there have been 7 military coups, and this has made the investment climate unattractive because the nation appears insecure for the foreign investor. Secondly, they are too many arbitrary and sudden changes in government policies and regulations which have led to a great deal of uncertainty. Foreign banks are scared from funding any project with a long gestation period. With this fear, most of these banks are now turning to major cash centres, that is, they are basically involved in deposits and disbursement of funds without getting involved in long term project financing. Thirdly corruption is endemic and has spread to every facet of the economy. It is widely prevalent in many government and public agencies and foreign banks believe that business operations may come to a halt if they is “no greasing of palms’’

Another major finding is that of weak legal system, the legal system has also has had its shortfall arising from the executive meddling in their affairs. Those who contravened the laws are not easily brought to book, those involved in trade malpractice or breach of contractual agreements are not properly prosecuted to serve as a deterrent to others. Based on these, most foreign banks tend to be worried about validity and enforcement of contractual agreements. Foreign banks require healthy private sector that can earn reasonable rate of return in a stable economic environment, that is, when the private sector is healthy, this is a good indicator for the foreign investor that the economy is, stable, thriving and can be a good investment opportunity. Government is too involved in the regulatory approvals .None is even left in the hands of the private sector through organised bodies as it is the case in the UK through the Financial Service Authority (FSA). The FSA regulates both prudential aspect and conducts of business. It is funded by industry levy and governs by a board of overseers. This board of overseers are mostly people in the financial sector not necessarily in government Llewellyn (2000).


For any economy to measure to international standard there must be the presence of some foreign banks, the Nigerian economy has witnessed such presence. However, a number of these banks tends to vary from time to time and from region to region. The analysis of the research has brought out the challenges being faced by foreign banks in Nigeria. Corruption and irregular government policies seem to be the major problem. In emerging economies like Nigeria, the government plays an active role as they are known to be the highest spenders. Over the years, various government policies have affected the operation of the banks. There is need for consistency in government regulation and approving system.

Finally, the political climate must be conducive because it affects the economic climate. When the political system is stable, more foreign investors will be willing to come into the country ,moreover, this will lead to better technology, better competition and assist in sanitising the Nigerian financial sector .


The time has come to reap from the aggressive promotional measures which the recent government have embarked upon, in wooing the foreign investors into the country. This will help Nigeria to keep abreast of the latest occurrences the world over and reap the benefits there from, that is, the government has come up with a roadmap for expansion of banks in Nigeria and incentives such as tax holidays, for foreign investors. (Nwandu 2005) Federal government should continue to put in place the needed infrastructural facilities to support potential investors. Less cumbersome bureaucratic procedures in government ministries or agencies will help in checking the problems that prospective investor would go through for them to have the correct information The researcher is also of the opinion...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Foreign Direct Investment in Nigeria Essay
  • Challenges of Microfinance Banking in Nigeria Research Paper
  • Essay on The Challenges in Learning Foreign Language
  • Determinants of Bank Profitability in Nigeria Essay
  • Central Bank of Nigeria Essay
  • Foreign Study Challenges Essay
  • The Challenge of Foreign Competition Research Paper
  • The Challenges of Managing Corperate Bank Account in Nigeria Essay

Become a StudyMode Member

Sign Up - It's Free