Rescued banks: Shareholders, Central Bank disagree

Wednesday July, 28, 2010

Effort by the Central Bank of Nigeria to sell eight rescued banks seem to have hit new hitches as shareholders of the affected banks are insisting that the banks can only be sold on their own (the shareholders) terms and not the State run regulator’s.

The Central Bank injected N620 billion to resuscitate the banks last year and say the plans to sell the institutions to foreign and local investors is in a bid to keep them afloat and ensure that they are better run.

The Central Bank Governor, Lamido Sanusi, had after a meeting with the shareholders two weeks ago, cautioned that if the on-going process to recapitalise the affected banks gets frustrated, the CBN would have no option than to liquidate the banks, a move that is provided for in the existing legal framework.

However, Mr. Sanusi seemed to be talking form both sides of his mouth when he said recently that the CBN does not have any business selling banks. He explained that the CBN only recommended reputable financial advisers, who work with the board and management of these banks to source for and negotiate with investors who can create value for the banks affected.

 The National coordinator of the Independent Shareholders Association of Nigeria, Sunny Nwosu, said the shareholders could not trust the executive directors appointed by the CBN.

The shareholders will prefer to negotiate with the non-executive directors not appointed by the CBN, Mr. Nwosu said.

Mr. Nwosu insists that the CBN does not have the power to sell what does not belong to it. "The only instrument is for the CBN to liquidate and transfer to the Nigeria Deposit Insurance Corporation and these two options will be too heavy considering the current condition of our economy," he said.

According to Mr. Nwosu, since the CBN has already guaranteed the safety of depositors, the shareholders should be allowed to salvage the banks.

"We have opted for recapitalisation but the CBN is bent on getting its friends outside the country to buy these banks. The governor said if any shareholder comes up with N100 billion, he will hand over the bank to the person," he said.

Shareholders would need to be given ample time in order to source funds with which to recapitalize the banks.

"CBN is saying three months but we need between 12 to 18 months to recapitalize these banks, after all, most of the problems emanated from the CBN action," Mr. Nwosu said.