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Government equity in banks reduced to 10%

Posted by By AMECHI OGBONNA on 2007/02/21 | Views: 326 |

Government equity in banks reduced to 10%

Federal and state governments having more than 10 percent equity holding in any of the 25 banks in the country have been directed to reduce same to 10 percent by the end of March this year.

Federal and state governments having more than 10 percent equity holding in any of the 25 banks in the country have been directed to reduce same to 10 percent by the end of March this year.

Mr. Godwin Oladejobi, a deputy director of the Central Bank of Nigeria, who represented the Director of Banking Supervision, Mr. Ignatius Imala at an emergency Bankers Committee meeting in Lagos on Tuesday, said that the monetary authorities may be compelled to effect the planned reduction by fiat, if at the expiration of the period, the concerned stakeholders fail to comply with new policy.

The new policy initiative comes against the backdrop of the abuses this category of equity holders has allegedly brought to the banking industry over the last few years.
The CBN boss who addressed the press alongside the managing directors of Skye Bank, Mr. Akinsola Akinfemiwa and Mr Ofong Ambah of Ecobank Nigeria Plc, stated that it was in demonstration of the seriousness with which the apex bank intends to pursue the new directive, that the matter had already been gazzetted, as an indication that its implementation will have the full weight of the law beginning from March. .

The new policy is seen as government’s approach to checkmate an unhealthy trend in the industry, where intervention of various governments in the affairs of some financial institutions contributed to the collapse of many banks.

It is believed that by reducing the percent of government holding in the banks, most of them will no longer have unrestrained access to the vault of the banks in such a manner that would lead to unprofessional credit and lending policies that could cripple their operation.

This latest development is in line with the current effort of the Central Bank of Nigeria to make banks more competitive.
Before the privatisation programme, federal and state governments as the large spenders in the economy held substantial stakes in the equities of various banks.

However, following their significant interests in the banks, such governments had always appointed officers to hold strategic positions, through which they have also influenced lending and disbursement of funds to the borrowers.

Meanwhile, as part of measures to encourage Nigerians to embrace the new currency restructuring in the banking system, the Central Bank has directed that 2 per cent of all cash withdrawals from bank should be in coins.

Consequently,o all banks in the country have been directed to pay part of customers cash request in coins which will be launched formally on February 28 this year.
The apex bank said that the old currencies will be withdrawn between now and May, 2007.

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