A foremost financial and economics expert, Mr Bismarck Rewane, has described the exit of two global banks, HSBC and UBS, from Nigeria as a bad indicator.
Also, the Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, also said Nigeria should be worried about the development.
The Central Bank of Nigeria said in a new report that two representative offices of foreign banks in Nigeria (HSBC and UBS) had been closed, bringing the number of representative offices of foreign banks to eight at the end of June 2018.
The CBN did not give reasons for the closure of HSBC Representative Office (Nigeria) Limited and UBS (Nigeria) Representative Office Limited, both located in Lagos.
Rewane, who is the Managing Director of Financial Derivatives Company Limited, said on Saturday that the country needed to attract more investment, which he described as a function of confidence.
“When big institutions like HSBC and UBS come to your country, it improves the confidence level and other investors will take their cue from there. When they leave the country, other investors will say that there must be a problem for them to leave. So, it is not a good thing,” he told our correspondent.
According to him, the banks don’t employ many people but their exit is a bad signal.
Rewane said, “Nigeria will be judged, not by what we say but by what we do. So, we can say all we want to say; it is what we do that is important. It is a bad indicator when two of the top banks, which we call bulge-bracket firms in investment banking, such as HSBC, UBS and Goldman pull out of your country.
“For example, if McDonalds and Burger King come into your country, it is a good indicator; it means that your consumer space is improving and that your urban centres are becoming very cosmopolitan. When KFC closed down its operations in Zimbabwe two weeks ago, you could see that the Zimbabwe currency actually stumbled.”
He added, “So, the exit of HSBC and UBS is definitely a negative thing. We need all the investment we can find at this time.”
Chukwu said the banks came into the country with the hope that economic prospect would improve but “unfortunately, projection on the economy is not quite strong.”
He also said, “For economic managers, it is a clear indication that investors are voting with their feet, and that the prospect of our economic environment is no longer as strong as it used to be when the banks came in. It is for us to sit back and then look at why our economy is no longer as attractive as it used to be.
“For me, it (the banks’ exit) is a cause for concern, given our drive to encourage foreign direct investors. Where foreign financial institutions are operating, it becomes easier for investors from their local environments to navigate the investee countries.”
But a professor of economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, said the closure of the banks’ Nigerian offices would not have any major impact on the Nigerian banking sector.
“It is not because the economy is not good,” he said, adding that the banks might be trying to adjust their costs in different countries and so might consider their operations in Nigeria not very important.
The CBN said in the report that the flow of foreign direct investment into Nigeria fell to N379.84bn in the first half of the year from N532.63 billion a year earlier.
Investor confidence in the country has been shaken since the central bank in August ordered MTN to bring back $8.1 billion to the country, part of the profits the South African telecoms firm sent abroad.