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CBN voids N46bn banks' shares

Posted by By Omoh Gabriel and Emma Ujah on 2006/01/08 | Views: 573 |

CBN voids N46bn banks' shares


THE Central Bank of Nigeria (CBN) says it voided bank shares valued at N46 billion during the consolidation exercise.

ABUJA - THE Central Bank of Nigeria (CBN) says it voided bank shares valued at N46 billion during the consolidation exercise. The CBN Governor, Prof. Charles Soludo, who disclosed this said the capital market received a boost with a total of N406 billion raised so far and N360 billion accepted by the CBN including foreign capital inflow of $654 million and £161,993.

This confirmed Vanguard's exclusive report last year that the CBN voided a total of N50 billion worth of shares.

The CBN had set up a capital verification unit to ensure that funds going into the recapitalisation were not laundered money. This was partly to conform with the request of the Financial Action Task Force set up by the international community to fight drug and other financial crimes related funds being passed into the banking system. The CBN had said it was undertaking the exercise to encourage real capital flow and discourage banks from using depositors' funds as loans to staff to buy up shares in the banks that were raising funds from the capital market. Also, fund which source could not be proved was rejected by the CBN capital verification. Applications that were cash based above N10,000 were disqualified from buying shares.

Indication emerged weekend that the CBN Governor and his top management team are now in a dilemma following intense pressure not to liquidate the 14 banks that failed to meet the N25 billion minimum capital base. The CBN, it was learnt, has already given concession to ACB to rejoin the Spring Bank group from which it pulled out earlier before the consolidation deadline which the bank could not meet with its new arrangement.

The 14 banks whose fate hangs in the balance are: Liberty Bank, Fortune Bank, City Express Bank, Triumph Bank, Metropolitan Bank, Gulf Bank, Afex Bank, Eagle Bank, Allstates Trust Bank, Assurance Bank, Hallmark Bank, Trade Bank, Societe Generale Bank (SGBN) , Lead Bank and Africa International Bank formerly known as BCCI.
Prof. Soludo had given a December 31, 2005 deadline for the recapitalisation of the banks and warned that any of the then 89 banks holding its licence that failed to meet the deadline would cease to exist from January 1, 2006.

However, owners of the 14 banks that were unable to raise the N25 billion, or merge with others or were not attractive enough to be acquired have been mounting pressure on Prof. Soludo from going ahead to liquidate the banks as planned.
Sources said the pressure from owners of the banks, with some of them working through powerful personalities at the presidency led to the fresh invitation of the CBN to the 25 recapitalised banks to acquire the 14 banks. It was learnt that inasmuch as the CBN wanted as many banks as possible to escape the sledge hammer, it did not foresee the new level of pressure, mainly from political bigwigs whose interest were in jeopardy in the affected banks.

Some of the affected banks had only been existing in name, when the banking sector reform was announced by the CBN in July, 2004 and would have been long liquidated without the on-going consolidation programme. It was not until November 14, 2005, a month and half to the deadline that the weak banks took a decision to form an alliance and to seek the apex bank's nod to pull themselves together to survive.
Although they secured approval in principle from the apex bank, they were given stringent conditions to meet before their plan could become a reality.

Less than a week to the end of the deadline, the group was at the CBN to ask for an extension of the deadline. A request which was turned down by Prof. Soludo and his group. The thinking was that shifting the goalpost for some banks would spark a fresh wave of criticism against the CBN given its earlier stance.

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