Nigeria to curb loans to firms that hurt

Reuters News
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Posted: Sep 09, 2011 1:03 PM
Nigeria to curb loans to firms that hurt

By Tim Cocks and Chijioke Ohuocha

LAGOS (Reuters) - Nigeria's regulators plan to introduce new lending standards for banks aimed at preventing loans to businesses that wreck the ecosystem, including oil companies not meeting environmental standards, the central bank governor said on Friday.

Lamido Sanusi told Reuters on the sidelines of a conference on sustainable finance in the commercial hub of Lagos that the standards would encourage environmentally responsible lending.

"Oil companies will have to know that if they want to borrow from Nigerian banks there are certain standards they have to comply with," he said, but did not flesh out details of what those standards would be.

"We will as regulators see that we even deal with the international banks on this. The principle is that Nigerian banks have a balance sheet that's taken from savings of Nigerians and that money should not be used to finance businesses that lead to the degeneration of the environment."

Oil companies operating in Nigeria have come under fire for oil spills in the Niger Delta, although they say most are caused by sabotage of pipelines.

A U.N. report has criticized the Nigerian government and Royal Dutch Shell for contributing to 50 years of pollution in a part of the Niger Delta it says needs the world's largest oil clean-up, costing an initial $1 billion.

Reacting to that report, Nigerian President Goodluck Jonathan has set up a committee to review it last month.

"You can't get fish in the rivers of the Niger Delta," Sanusi, wearing a traditional northern Nigerian white robe, said. "Why did you think the people of the Niger Delta had an uprising? It's not about oil companies making money, it's about the environment being destroyed," he said.

CONFIDENCE IN CHINA'S YUAN

Sanusi was speaking after returning from a trip to China in which he pledged to put 5-10 percent of Nigeria's foreign currency reserves into China's yuan, which he said would inevitably become a reserve currency.

He defended that decision as an attractive long term investment on Friday, saying there were strategic imperatives on China that he thought would lead the yuan to appreciate.

"It is a step that opens up a number of windows. Investment flows coming in renimbi (yuan) without going through a third currency, settlements, the ability to finance and borrow on Asian markets that are extremely liquid at this time."

He suggested Chinese policy makers would in the long run have to allow the yuan to rise.

"Their are a number of strategic imperatives. The major driver of growth is going to be domestic consumption, inflation in China is toping 5 percent and a lot of it is imported, and given what's happening with U.S. downgrade, the Chinese are going to have much less appetite for dollar balances," he said.

"We're going into a currency that will appreciate."

Sanusi said Nigeria was moving toward the end of its banking crisis, as the nine lenders rescued in a $4 billion bail out in 2009 prepare to vote on merger deals or await more capital injections as nationalized banks.

"All the banks are having their EGMs (shareholder meetings to vote on recapitalization). We gave them three months to show the market they're on their way to integration," he said.

"I've no doubt that by the end of September we'll have drawn a line under the banking crisis."