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Shareholders Funds To Drive Sale Of Rescued Banks

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Sanusi Lamido, governor, CBN worried by the negative perception occasioned by the delay in disposing of the rescued banks, the Central Bank of Nigeria (CBN) is proposing that the Asset Management Corporation of Nigeria (AMCON) will focus initially on purchasing qualifying non-performing loans (NPLs) along with the associated rights to underlying collaterals, when it becomes operational.

Consequently, the apex bank, which has embarked on reconciliatory moves of late to stir dwindling confidence and also carry major stakeholders along in its ongoing reform programme, would want AMCON to concentrate on margin loans given by banks badly hit by the capital market crash, as they are easier to value. Specifically, the development is expected to restore Negative Asset Value (NAV) – bank’s total assets minus total liabilities – through taking over of the bad loans by AMCON, so as to be able to report positive shareholders’ fund. Shareholders’ fund is capital invested in a business by its shareholders, including retained profits or part of a bank’s financial assets consisting of share capital and retained earnings. It is an alternative term for owners’ equity.

The implication is that investors, both local and foreign, will be encouraged to resume talks with CBN-appointed holding managers of the rescued banks which broke down due to fresh discoveries after the due diligence carried out by some of them on the embattled banks. Ultimately, these investors will be expected to contend with the minimum capitalisation, when the problem of shareholders’ funds is solved by the corporation.

In fact, in the wake of the capital market boom in 2008, the banks dipped into shareholders’ funds to purchase, under fictitious names and proxies, shares under the much abused margin loans. But banks, particularly the rescued ones, are not helping matters as they are still charging interest on some margin loans entered in their books as bad, and which AMCON is expected to purchase.

For instance, an acceptance of the letter of resignation from one of the distressed banks to an ex-staff says: “Kindly note that your public offer loan is running at 16.0 percent beginning from your resignation date.” In another instance, dividends that accrued to the shares of the same loan have been taken over by the bank through letters dated September, November and December 2009 from the registrars to the head office of the bank.

However, CBN is said to be disturbed by the delay in the disposal of the distressed banks through mergers and acquisitions, but observed that the only way to reverse the trend is through positive shareholders’ funds.

Interestingly, AMCON is also expected to distribute those assets to investment managers, who will have the option of taking a variety of portfolios through an investment strategy that will be defined by it. This could be through selling some of the shares and going into real estate. Besides, CBN sees it as a vehicle for distributing losses between the banks and the brokers, following the capital market loss of about 70 percent to the crisis.

Justifying CBN’s position, Razia Khan, global head of macro economic research, Standard Chattered Bank said: “In the case of any asset management company, one would expect it to buy assets that can be easily valued first – in this case margin loans – as there is a market for it. Even if higher than market prices are paid for the assets in order to recapitalise the institutions, this is standard practice with AMCs the world over.”

Johnson Chukwu, managing director and chief executive officer, Cowry Asset Management Limited, said: “What the CBN means is that AMCON will basically start with taking over the bad loans of the troubled banks and the collaterals which were used to secure the loans. This action is intended to make sure that their net asset value, which, for the troubled banks is all negative, will be reversed to positive. As you know, the NAV, which is the same thing as the shareholders’ funds is negative for the troubled banks because they had to take losses from their non-performing loans.

 ”When these loans are taken over by AMCON, the banks will write back the huge provisions they made for the loans into profit or extraordinary income and if the write backs are as high as their negative NAV, they will be able to report positive shareholders’ fund. For the banks to be attractive to new investors, be they local or foreign, they need to have positive shareholders’ funds.

“For instance, if an investor has to take over bank A today, he has to first inject over N200 billion to bring its shareholders’ fund to positive before injecting another N25 billion to meet the minimum capitalisation for banks. If, however, AMCON is able to reverse the negative shareholders’ fund, then the new investor will only have to contend with raising N25 billion.”

Akinbamidele Akintola, research analyst, Renaissance Group, was of the opinion that given the 10-year life span for AMCON, it will be in a position to manage the loans for recovery, post-capital injection, adding that “it would remain a part of CBN regulatory infrastructure going forward to reduce NPL levels in banks.” He however called for a clear and transparent valuation model for taking over the loans.

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MWUN Threatens To Down Tools Over Failed Quay Aprons 

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The Maritime Workers Union of Nigeria (MWUN) on Friday threatened to shutdown port operations over the dilapidated quay aprons at some of the nation’s seaports.
Speaking in Lagos during a joint press conference put together by the union and Nigeria Association of Road Transport Owners (NARTO), President General, MWUN,  Comrade Adewale Adeyanju, reiterated that the lives of labour workers at the affected terminals was at risk, saying that “injury to one is tantamount to injury to all.”
Adeyanju lamented that the union cannot allow the situation consume some dockworkers before protesting against the trend, noting that as a responsible and proactive group, there was the need to down tools for government to do the needful.
Our correspondent gathered that two port terminal, at Tin Can Island Port Complex, Lagos, and another  at Port Harcourt, Rivers Port  Quay wells have been in  dilapidated condition for over five years without any sign of repair works from the Federal Government of Nigeria.
Recall that Minister of Transportation, Mu’Azu Sambo, who also inspected the dilapidated portion of the Tin Can Island Port quay apron recently, asked Mohammed Bello-Koko, Managing Director of Nigerian Ports Authority (NPA) and the engineers to forward the ‘as-built’ plan of the jetty, alongside other documents to his office for immediate action.
While reacting to questions from the journalists, Adeyanju said the union will also engage management of the NPA in furtherance to address the menacing failed infrastructure of the terminals.
On the recently inked Memorandum of Understanding (MOU) with the NARTO, the President General noted that the collaboration has been in existence for a long while with the aims to cater for drivers’ welfare and support projects of the NPA in port terminals operations.
He also warned members of the dockworkers branch to cooperate and embrace the agreement with the trucking association, noting that any attempt by the dockers to flout the MoU reached so far would result to sanctions from the national executive of MWUN.
He assured the leadership of NARTO, led by its National President, Alhaji Yusuf Othman, of the Union’s commitment towards ensuring that progress and success is achieved  in the agreement.
According to him, the MoU is binding for members of the dockworkers branch, stressing that the Lagos ports was a test run with plans ahead to extend the agreement to other seaports, including, Warri, Calabar and Port Harcourt ports.
Earlier, President of NARTO, Alhaji Othman, lauded the MoU reached with MWUN, adding that success will be achieved in the merger. Othman said in line with port operations, the merger will bring about free flow of vehicular movement in and out of the ports calling on the parties involved to embrace sincerity and transparency for the benefit of the industry and Nigeria.
He said, “We wish to draw the attention of the general public to the decision for MWUN and NARTO to synergise and collaborate on a basis of common desire to ensure seamless environment to do business in the maritime sub sector of the nation’s economy”.

By: Nkpemenyie Mcdominic, Lagos

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PenCom Approves Use Of Pensions For Mortgage

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National Pension Commission (PenCom), has commenced approval for workers to use 25 per cent of their Retirement Savings Accounts for mortgage.
PenCom in a press statement released on Friday, titled ‘PenCom approves guidelines on accessing Retirement Savings Account balance for payment of equity contribution for residential mortgage by RSA holders’, noted that the approval was in line with the Pension Reform Act of 2014.
It stated in part, “PenCom is pleased to inform all stakeholders and the general public, particularly RSA holders, that the commission has approved the issuance and immediate implementation of the guidelines on accessing RSA balance towards payment of equity contribution for residential mortgage by RSA holders.
“The approval is in line with Section 89 (2) of the Pension Reform Act 2014, which allows RSA holders to use a portion of their RSA balance towards payment of equity for residential mortgage”.
According to the PenCom, the guidelines cover pension contributors in active employment, either as a salaried employee or as a self-employed person.
It added that the maximum amount to be withdrawn is 25 per cent of the total mandatory RSA balance as of the date of application, irrespective of the value of equity contribution required by the mortgage lender.
It further stated that where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, that RSA holders may utilize the contingency portion of their voluntary contributions (if any).
To qualify as a mortgage lender for the purpose, it stated, the company must be licensed by the Central Bank of Nigeria, comply with the Contributory Pension Scheme and have valid Pension Clearance Certificate.
“The RSA of the applicant shall have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years).
“A contributor under the Micro Pension Plan is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application, and the RSA Holders that have less than three years to retirement are not eligible.
“Married couples, who are RSA holders, are eligible to make a joint application, subject to individually satisfying the eligibility requirements.
“RSA holders, if registered before 1 July 2019, must have their records updated through the RSA data recapture exercise.
“Application for equity contribution for residential mortgage shall be in person and not by proxy.” it stated.

By: Corlins Walter

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Car Hires Operators, Bolt Driver Flex Muscles In PH Airport

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There was pandemonium at the Port Harcourt International Airport Omagwa, Friday, as the Accredited Car Hires operators clashed with a Bolt taxi operator over passengers.
The scenario that played out got to the extent that everyone scampered for safety, as the Bolt driver went wild with his vehicle, and defied everything put in place to stop him, determined to crush anything, including humans, that stool on his way.
Problem started when the suspected Bolt driver was stopped by the Car Hires.  After a heated argument, characterized by abuses, the bolt driver decided to enter his vehicle in anger, after he sensed that his car was in danger of being confiscated.
In the commotion that ensued, the car hires, as usual, used their iron piercing instruments to block the tyres of the vehicle to keep it within their custody, and the uproar attracted  the attention of other airport users.
The Car hires and their allies at the airport had always insisted that no other taxi operator must carry passengers at the airport, since they do not pay any levy to the airport authority.
Consequently, they use every force necessary to stop other outside taxis from carrying passengers from the airport.
Friday’s incident took a new twist, as the Bolt driver over. Powered the forces used by the car hires, and went on a suicide mission, which made people to scamper for safety, including the car hires.
The driver went on a speed spree away from the airport. Even when the piercing instruments cut his tyre, he drove in such reckless manner capable of pulling down a building, thereby setting the entire environment on panic.
Some security agents present had to clear the way for the Bolt driver who drove out of the Airport with the iron piercing instrument obstructing his car, defiling all attempts to stop him.

By: Corlins Walter

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