Central Bank of Nigeria (CBN) has explained that investors of the eight banks whose managing directors were sacked by the CBN have not lost everything in the bank.
CBN governor, Sanusi Lamido, clarified that what happened is that many of the banks have had their capital base seriously eroded by the losses the banks made as a result of marginal loans they advanced to stockbrokers and other investors in the capital market.
Most of the banks have had their shareholders’ funds wiped out in technical accounting sense, the governor remarked, but that does not mean that all the assets of the banks like landed property etc, are gone.
He further explained that one of the reasons the CBN intervened in the affairs of the banks was to ensure that the banks did not go under. “We are trying to recover the bad loans of these banks. To say that they have lost their capital does not men that the institutions are worthless. Every recovery is capital recovery,” he said.
As at last week, the CBN governor said a total of N140 billion of such bad loans has been recovered by the Economic and Financial Crime Commission (EFCC).
This figure is still a far cry from N1.6 trillion the CBN said is the entire banking industry’s total exposure to the stock market and oil and gas industry as at December 2008.
He said the action taken by the CBN is in the best interest of the shareholders disclosing that by, the time the CBN finishes with its forensic audit of the banks, many of the shareholders would be startled to find out that the purported majority shareholders of their banks were not actually the majority shareholders. The governor said many of the former bank chiefs merely used special purpose vehicles to allocate shares to themselves without paying a kobo for such shares, yet they were collecting dividends on those spurious shareholding.
Sanusi said the on going reforms in the banking industry would not have been possible without the cooperation of President Umaru Yar’Adua and the law enforcement agencies like the EFCC.
Shareholders of the affected banks (Intercontinental Bank International, Afribank Plc, Finbank Plc, Union Bank, Bank PHB, Spring Bank, and Equitorial Trust Bank) had been apprehensive following media reports which suggested that they have lost their shareholding in the banks.
But with the CBN governor’s clarification, that confusion has been erased. It is now envisaged that some of the shareholders that have threatened to challenge CBN action in court may rethink the next line of action to take.