Posted by Mojeed Jamiu (Lagos, Sanya Adejokun and Bassey Udo (Abuja) on
A gale of distress and imminent collapse is blasting through the financial markets, fired by the double whammy of the withdrawal of public funds and the new capitalisation demanded by the Central Bank of Nigeria (CBN).
• CBN to withdraw more funds today
• Deducts N69b from banks' account
A gale of distress and imminent collapse is blasting through the financial markets, fired by the double whammy of the withdrawal of public funds and the new capitalisation demanded by the Central Bank of Nigeria (CBN).
Last week, 25 banks out of the total 89, including a settlement bank, crashed out of the 22 clearing centres designated nationwide. Even as this continues, the CBN is expected to withdraw more public sector funds in commercial banks from today.
A CBN source said in Lagos at the weekend that although the settlement bank withdrew from clearing in Abuja and Lagos on Wednesday, the other 24 have been coming in and out of clearing for about a month ago.
A managing director of a new generation bank who reacted to developments in the banking industry since the second half of the year, disclosed that the heat is on most banks as a result of the new N25 billion capitalisation requirement.
In his view, some banks are yet to fully recover from the shock created by the July 6 declaration by CBN Governor Charles Soludo that banks must capitalise by the end of 2005s.
Despite protests by the banks over the withdrawal of the funds, the CBN would today begin the debiting of accounts of banks to the tune of N69 billion.
The amount is said to belong to various public institutions, including the Nigerian National Petroleum Corporation (NNPC), its subsidiary, the Nigerian Petroleum Technology Development Fund (NPDTF) and the Bureau of Public Enterprises (BPE).
As a way of forcing down inflation, the CBN announced the withdrawal of N74.5billion public funds from the banks, although they have since intensified their lobby against the policy which they claim would cause them distress.
Consequently the NNPC engaged the CBN in a heated debate, canvassing the importance of being allowed to maintain its accounts and those of its 29 subsidiaries with the banks for easy access. It has declared that it has no intention to move its funds from the banks, which have also refused to co-operate with the CBN on the issue.
A breakdown of the figures shows that N12 billion would be withdrawn from the NPTDF on top of the N8 billion already recalled from a total N20 billion; the NNPC (N46 billion); the BPE (N1 billion).
The withdrawal of public funds by the CBN is aimed at regulating liquidity in the banking system.
For sometime, 11 unhealthy banks have been permanently out of clearing while another 14 joined as a result of the withdrawal.
Of all the financial houses, First Bank is the most capitalised with 42 billion, followed by Union Bank (N37.485 billion).
Others down the rank include Zenith (N16 billion) with about N27 billion post-Initial Public Offer (IPO), Guaranty (about N25 billion post-IPO). The Intercontinental Group (Intercontinental Bank, Global Bank, Gateway Bank and Equity Bank) has a consolidated capitalisation of N20 billion.
Standard Trust has a post-IPO capitalisation of about N22 billion while the 2003 results of UBA put its capital base at about N16 billion.