Banking in Nigeria and Chinese Economic Diplomacy in Africa

This research paper by the South African Institute of International Affairs examines the evolving relationship between China and Nigeria, specifically focusing on the Nigerian banking sector's regulatory reforms and the potential for increased Chinese investment in the financial industry to complement existing economic ties in oil, infrastructure, and agriculture.

• The Nigerian banking sector underwent a major recapitalisation exercise in 2006 led by former CBN governor Charles Soludo, which reduced the number of banks from 89 to 24 to increase global credibility. While this increased the total asset base from NGN 3.21 trillion to NGN 6.5 trillion and improved the non-performing loan ratio from 19.5% to 9.5%, it also led to aggressive credit expansion and weak supervisory oversight.
• Following the 2008 global economic meltdown, CBN governor Lamido Sanusi initiated reforms starting in June 2009 to address systemic fragility. These reforms included a special audit that revealed significant debts in the Expanded Discount Window (EDW) totaling NGN 256,571 billion, primarily owed by five banks: Oceanic Bank, Intercontinental Bank, Finbank, Afribank, and Union Bank.
• Current Nigerian banking reforms have introduced several structural changes: the abolition of universal banking in favor of commercial and specialised banking; the creation of the Asset Management Company of Nigeria to handle toxic assets; and the limitation of bank CEO terms to an initial five years, renewable once.
• Chinese economic interests in Nigeria are extensive and diverse, with a primary focus on oil. Notable investments include a $4 billion infrastructure deal for oil block rights, a $2.7 billion stake by CNOOC in an offshore deepwater oil field, and a $7.2 billion payment by Sinopec for Addax in 2009.
• Beyond oil, China is active in Nigerian telecommunications (ZTE Corporation), construction (the Nigerian Communications Commission building in Abuja), and agriculture, where over 500 Chinese experts work across 20 Nigerian states. Trade volume grew from $178 million in 1996 to $2.83 billion in 2007.
• Existing banking links between the two nations are limited but growing. First Bank has a licence to operate in China and MoUs with the Yuemei Group, Shenzhen Energy Group, and Guangdong Xinguang Group. Standard IBTC Bank is linked to the Industrial and Commercial Bank of China (ICBC), which holds a 20% stake in the South African Standard Bank Group.
• The author suggests that China could further its economic diplomacy by investing in Nigerian banks, specifically mentioning Wema Bank and Union Bank as options among 'rescued' banks, or Skye and Sterling among profitable ones. The CBN governor has indicated openness to foreign ownership, potentially even outright ownership, specifically mentioning China Construction Bank.

APA

Alao, A. (2010). Banking in Nigeria and Chinese Economic Diplomacy in Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-65.pdf

Chicago

Alao, Abiodun. Banking in Nigeria and Chinese Economic Diplomacy in Africa. South African Institute of International Affairs, 2010. https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-65.pdf.

Wikipedia

{{cite report |last1=Alao |first1=Abiodun |title=Banking in Nigeria and Chinese Economic Diplomacy in Africa |publisher=South African Institute of International Affairs |date=July 2010 |url=https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-65.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{alao2010banking, author = {Alao, Abiodun}, title = {{Banking in Nigeria and Chinese Economic Diplomacy in Africa}}, institution = {South African Institute of International Affairs}, year = {2010}, month = jul, url = {https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-65.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }