Panic has gripped depositors in the eight rescued banks while the banks now face uncertain future over threat of nationalisation hanging on them after the September 30 deadline handed over to them by the Central Bank of Nigeria (CBN)
The affected banks are Union Bank, Spring Bank, Intercontinental Bank, Oceanic Bank, Bank PHB, Spring Bank, FinBank and Afribank.How the affected banks came about their misfortune is now history as far as the Nigerian financial system is concerned.
The CBN bailed out eight of the country”s 24 banks in 2009 with N620billion to prevent their collapse and they have up till September 30 to recapitalise or merge with another banks.
What matter most now is how the Central Bank of Nigeria has been able to ensure that these sick banks remained a go-on concern without creating an unnecessary panicky moment in the nation financial hub.
The Central Bank of Nigeria put in place the Asset Management Company of Nigeria (AMCON) to absorb the toxic loan of the sick banks pending the time prospective investors would take over them as part of the recapitalisation programme lined up for them.
However, some shareholders of the affected banks were not in agreement with the apex bank on this decision.
Mr Erastus Akingbola, former managing director of Intercontinental Bank and Finbank former managing director Mr Okey Nwosu had gone to court to halt the CBN action , the court dismissed this application in June, 2011.
The apex bank, in its quest to speed up the process of capitalisation did not want any unnecessary distraction from the shareholders of the rescued banks thus went tough, initially threatening to liquidate any rescued bank which failed to recapitalise by September, 2011 .
This pronouncement created panic in the capital market as the shares of the sick banks plummeted in the market.
The market value of their equities trading at the Nigerian Stock Exchange dipped by over N70 billion in two straight weeks of bear triumph on the trading floor of the Exchange.
The shareholder.apprehensive of the grave implications of banks’ liquidation in Nigeria , embarked on massive offloading of shares of the rescued banks, a situation that turned the stock market to a bearish one.
The market capitalization of the eight banks has been on a steady decline , worst hit was the Union Bank Plc and Oceanic Bank ,
Two weelks of persistent bear onslaught in the market saw the market value of Union Bank equities trading at the NSE lowest as the capitalization stood at about N26.8 billion that week,.
The market capitalization of Bank PHB has also fallen from over N21 billion to N16.1 billion., same with Finbank and Intercontinental Bank with both stocks now going down very seriously,
Is the apex bank right in the actions so far taken on the rescued banks ?ShehuMallamMikail, the national president of Nigeria Consztance Shareholders Association thinks so.
He said with the on-going reforms, there is no one that will not believe that what CBN is doing is the right thing at the right time stressing that if the CBN did not come out, nobody will know what the banks were doing, even to their shareholders.
Commending the apex bank, he said the Asset Management Corporation (AMCON) is in the right direction, and at the right time
He said “If not because of that, how will I be able to know that some banks are not doing well at a particular time, or that the shareholders funds are being misused? So, how can we start saying that because the shareholders are having good rapport with a director of one of the banks that he has the gut to sue CBN, let the person go ahead if he can, because I know that he does not have the authority to do that. CBN is a regulatory authority and only the banks have the right to sue CBN and that has to be through the industrial court. “
Because of the apprehension the CBN liquidation threat on the sick banks caused in the financial sector, the apex bank through the Deputy Governor, Financial System Stability, Dr Kingsley Moghalu disclosed that rather than liquidating the affected banks, the apex bank was now considering the option of nationalising the rescued banks which failed to recapitalise on the appointed date.
Speaking in far way Pretoria , South Africa , the deputy governor said AMCON may become a majority shareholder in the rescued banks by bridging their equity gaps.
Noting that the deadline was a very serious one, Dr Moghalu said the apex bank has a responsibility as a systemic financial regulator to ensure that normality is restored in the country banking system.
Dr Moghalu who disclosed that the CBN is not all that favourably disposed to nationalisation stressed that it is better than outright liquidation .
As a result of the absence of clarity on the position of Nigeria failed banks,investors are now facing cloud of uncertainty.
Fitch rating recently said” if Nigeria is less inclined to support the banks, there may be negative implications for the ratings of Nigerian banks”
The apex bank deputy governor who hinted that there were vested interest bent on scuttling the privatisation process for sick banks said as a regulator “we have the policies and power to make sure we restore full financial system stability one way or the other”
The situation is not all that bad as many shareholders would make us believe, three of the sick banks , were , according to Dr Moghalu expected to sign agreements with investors in the coming weeks.
He said the apex bank was also exploring other options aside from nationalisation and liquidation for banks that fail to meet the September ending deadline for recapitalisation.
Said Dr Moghalu” I want to down play the option of liquidation, we put on the threats, but it was to concentrate peoplesminds.It doesn’t mean we will wake up and liquidate banks. If people wants to play rough, we have to show them that we can play rough”
Whether liquidation or outright nationalisation or any other options, it is clear that the apex bank was determined to put the issues of the eight rescued banks behind it once and for all by September 30, 2011. Actions, whether positive or negative will be taken, whatever action taken however, the apex bank has often times told all who care to listen that the thousands of hapless depositors would be taken care of in case of any eventuality.
September 30 is just around the corner, all stake holders are watching how the apex bank would create history as far as handling the cases of the eight rescued banks are concerned.