CBN Reverses decision to Liquidate ailing banks, decides to nationalize.

CENTRAL Bank of Nigeria, CBN, yesterday, reversed its earlier decision to liquidate rescued banks that failed to recapitalize by September 30, 2011.


The bank said it will, instead, nationalize the banks, with the Asset Management Corporation of Nigeria, AMCON, acquiring controlling stakes in them.

CBN Deputy Governor, Kingsley Moghalu, said in an interview in South Africa: “The deadline is a very serious one. We have the responsibility as a systemic financial regulator to make sure the banking system is normalized by the end of the year.


While nationalization is not the favoured option, it is preferable to liquidation. If AMCON takes a majority stake in a lender, it may manage the bank for a year or two before selling it.”

Majority shareholding
Moghalu said the CBN will move in after September 30, through AMCON, which will become a majority shareholder in the banks, adding that it will plug their equity shortfalls, and help them to recapitalise, preparatory to selling them.

He said: “Stability in the short term has been achieved. The banking system is functioning. We are working towards medium to long-term stability, but for that to happen, we must resolve the eight banks in which we have intervened.

“There are a number of vested interests coming to scuttle the process; I can assure you those vested interests won’t prevail. As the regulator, we have the policies and powers to make sure we restore full financial stability one way or another.


“At least three of the rescued banks are expected to sign agreements with investors in coming weeks. The Central Bank is also investigating options aside from nationalization and liquidation for lenders that fail to meet the September 30 deadline.

“I want to downplay the option of liquidation. We put out the threat, but it was to concentrate people’s minds. It does not mean we will wake up and liquidate banks. If people want to play rough, we have to show them we can play rough.”

Governor Lamido Sanusi has led a restructuring of the banking industry since the 2009 debt crisis, which witnessed a slump in equities and oil prices and resulted in $10 billion of toxic debts on banks’ books. Intercontinental Bank and Union Bank are among failed lenders that have returned to profit.

Some shareholders and former bank executives have sought to stall the recapitalization process through court action.

Former Managing Director of Intercontinental Bank plc, Erastus Akingbola; and Finbank’s ex-Managing Director, Okey Nwosu; had their applications to halt the process dismissed last month.

Fitch Ratings said on June 15 that lack of clarity on the positions of Nigeria’s failed banks has led to “uncertainty” for investors.  It added that if the country was “less inclined” to support the banks, there may be negative implications for the ratings on Nigerian banks.

Banks can now deploy offsite ATMs

Meantime, the CBN  has said that banks operating in the country will deploy additional 75,000 automated Teller Machines, ATM before December 11.
CBN Deputy Governor in charge of Operations, Mr. Tunde Lemo told newsmen in Abuja: “Banks can now roll out ATMs beyond their premises”.
He said that the Central Bank has amended the rules prohibiting outside premises roll-out, a development that is a reversal of its earlier position which prohibited banks from having off site ATMs.

Lemo said: “We planned that we will have 10, 000 units within the next one year and between now and 2015, we plan ATM penetration of 75, 000 which we have benchmarked to Brazil. The question really is, with the constraints that banks cannot roll out outside of their premises, how possible is that ambition? I can tell you that for this purpose, we have decided to bend the rules a bit because the banks, with their very robust balance sheets, have the financial fire power to draw up a much more roll-out than we had anticipated.”

The deputy governor said that some of the factors that gave rise to a high ATMs fraud record had been fully addressed and that measures have been put in place to minimize such cases in current aggressive electronic payment campaign. He said constant power supply and efficient telecommunications system were two major challenges facing the ATMs but that they have all been taken care of in the new drive.

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