LAGOS, Nigeria — The Central Bank of Nigeria pledged to inject nearly $2.6 billion into five troubled banks and dismissed the institutions’ top executives, a dramatic move aimed at rescuing the firms from what the government said was chronic mismanagement.
Nigeria is a big petroleum exporter and Sub-Saharan Africa’s second-largest economy, behind South Africa. Rising oil prices in recent years triggered a borrowing and investment bonanza in the country. Amid the boom, banks lent heavily, including to speculators in the stock market, which was on a tear.
That left many banks overexposed when commodities prices turned around, the world sank into its current economic slump and Nigerian shares fell. The Nigerian Stock Market has declined roughly 60% from its highs early last year.
On Friday, Nigeria’s newly installed central-bank governor, Lamido Sanusi, cited high levels of nonperforming loans discovered by audits being conducted at all 24 of Nigeria’s banks. Five other banks have passed audits.
Mr. Sanusi attributed the problems at the five troubled banks to “poor corporate governance practices, lax credit administration processes and the absence or nonadherence to the bank’s credit risk management practices.”
The five banks had been near total collapse before the central bank’s intervention, Mr. Sanusi said. He indicated the government wasn’t interested in keeping stakes taken in the banks in exchange for the recapitalization. Instead, he suggested he would encourage new investors to strengthen balance sheets further.
In addition to pledging capital, the central bank said it had removed the top executives at the affected banks: Intercontinental Bank, Union Bank of Nigeria, Oceanic International Bank, Finbank and Afribank. Though the banks are publicly traded, the central bank has the authority to make such personnel decisions in certain circumstances.
“The banks have lost their money in bad loans. We have put in money,” said Mr. Sanusi during a news conference in Lagos. “We have questions about the management, so we have put in new management.”
By Friday afternoon, security forces had been dispatched to the banks’ headquarters, according to local reports.
The central bank said the five banks would continue to operate and depositors’ money would be safe. Analysts hailed the move.
Mr. Sanusi took office in June pledging to reform the banking industry and crack down on banks with poor lending records. A former banker, he has a reputation for prudent risk management.
Separately, government troops pulled out of a key area in Nigeria’s oil-rich Niger Delta region this week as part of a high-profile amnesty program for militants who have been attacking another pillar of Nigeria’s economy: its oil fields.