By Emma Ujah, Abuja Bureau Chief and Emma Ovuakporie
Troubled banks’ shares now on full suspension, Okereke-Onyiuke asks customers not to panic
LAGOSâ€”The five Managing Directors ofÂ banks sacked by the Central Bank of Nigeria (CBN) on Friday may be in for more trouble as the Federal Government has launched an investigation into their personal financial involvements with a possibility of putting anyone found wanting on trial.
This is coming just as the Economic and Financial Crimes Commission (EFCC) says it has placed aÂ 24-hour surveillance on the affected former chief executives.
It was reliably gathered from sources close to the anti-graft agency that a standing order was issued to the chairperson of the agency, Mrs Farida Waziri that on no account should any of those affected by the CBN’s purge be allowed to leave the shores of Nigeria until a thorough investigation might have been conducted.
In another development, the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE), yesterday, unanimously agreed to place the shares of the affected banks on full suspension.
This is contrary to speculation that the shares would be placed on technical suspension, a situation where the price of the shares in the stock market would be frozen while transactions on them will continue.
The five banksâ€™ shares that were suspended from the stock market are: Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Fin Bank Plc and Afribank Nigeria Plc.
The full suspension implies that the shares of the five affected banksâ€™ will no longer be traded on the floors of the Exchange Market until the regulatory authorities lift the suspension.
The implication of the suspension of these banksâ€™ shares is that the market capitalization of the Exchange will be drastically affected since their shares will not be traded upon.
Sacked MDs under investigation
The CBN Governor, Mr. Sanusi Sanusi, who made governmentâ€™s position about the sacked MDs known while answering question on the CNBC Africa Business Television programme said the affected banksâ€™ chiefs were grossly unprofessional with unbecoming and bad examples.
He added that exposure to margin loans by the affected banks was a direct failure of risk management which the apex bank under his leadership acted decisively against.
He said, â€œthe audit has established that exposure to margin loan is failure of risk management. It is estimated that the exposure to margin loan in the oil and gas sector as well as in the telecommunications, like credit for investment in Transnational Corporation is about N800 to a trillion naira.
And the five affected banks which managements we have sacked alone account for about half of this exposure.
â€œSo we needed to move fast so as to prevent the funds of depositors, ranging about N8 trillion and creditors funds from being in jeopardy. And I acted within the law. The BOFIA and the CBN Act areÂ Â very clear.Â We want to see that investors and creditors have greater confidence in the system .
We have not accused anyone of infraction yet. But if we find out that the affected sacked banks officials were involved in insider related abuses, we intend to prosecute them.
â€œAnd to make the point very clear, we will not tolerate non disclosure of any problem. And we will not hesitate to dealÂ with any management that has consistently under â€“ reported .
We want to have a situation that by the end of the year, we will be dealing with banks that youÂ can be sure of, both as a depositor or as a creditor. The owners of banks must therefore take steps to ensure that they donâ€™t jeopardize depositors or creditorsâ€™ investments. If they donâ€™t, we will deal with them because a banking licence is a privilege and not a right.â€
He assured however, that the Federal Government had no intention of taking over the affected banks, in spite of the N400 billion injected into them , as according to him, the intention was only to strengthen the banks.Â Government funds being injected into the banks, he explained, would be converted to a type of preference shares.
â€œWe have no plans of nationalizing any bank. The plan is towards conversion of the liquidity into equity in the forms of preference shares. The intention is to look for investors to acquire them and we get out as quickly as possible because I do not believe that government is a better manager than the private sector. No. the liquidity is just to deliver support.â€
EFCCâ€™s 24 hours surveillance
As at yesterday afternoon, more EFCC operatives were deployed in Lagos where all the banks have their corporate headquarters for easy monitoring of their movements.
According to the source, the EFCC is going to search all nooks and crannies of the country to fish out the debtors in active collaboration with other security agencies in the country.
It was also revealed that the operatives are expected to feed the commission with necessary information about the movement of the suspects.
When contacted the Head, Media and Publicity of EFCC Mr Femi Babafemi confirmed that the agency had actually swung into action to bring to book the suspects after a thorough investigation might have been carried out.
CBN, SEC, NSE suspend shares trading
Speaking to newsmen in Lagos, Director General of the NSE, Professor Ndi Okereke Onyiuke said â€œ The CBN, SEC, and NSE have for the first time united to take a decision to place full suspension on the shares ofÂ the five affected banks in other to protect the interest of investors and the economy generally.
â€œ The suspension of the shares of these banks will last for two weeks, thereafter the regulators willÂ meet to review it. The suspension starts today (yesterday) to end Friday 28, August 2009. Before then, the regulators, i.e, CBN Governor, SEC Chairman, and Director Genera (DG), NSE DG, and its president would have met to review what would have happened with these banks coupled with the reaction of the market.
Even before then, I would have held discussion with president of Chartered Institute of Stockbrokers(CIS), and Association of owners of stockbroking houses to get their input. In the process of reviewing the banks, they may be placed on technical suspension, full suspension or removal of the suspension.â€
She declared that the CBN has a duty to protect the interest of depositors and other stakeholders, hence do not require the permission of the National Assembly or Senate to take the action it did.
According to her, â€œthe N400 billion that the CBN has injected into these banks is not from the federation account.
The CBN has the right to bail out the banks that are in distress, provided it gets the consent of the president of the country. Therefore, investors and depositors should not panic because the action was taken to sanitise the banking industry and to prevent the collapse of any bank.â€
Continuing she said, â€œ if customers of all the affected banks go to withdraw their money from these banks it will send a wrong signal and might lead to a run, which will eventually lead to total collapse of these banks.Â We donâ€™t want any controversy on this issue because it might lead to greater problem if there is massive withdrawal.
The new managing directors of these banks have been given a mandate to ensure that they revive the banks and bring the needed confidence.â€
While commenting on the money injected into the five banks, Onyiuke said, â€œ The money injected is to bail out these banks as done by other developed economies. Our own banks should not be an exemption .â€
In his own comment, a doyen of stockbrokers , Alhaji Rasheed Yussuff said, â€œ there is no need for people to panic since the action of the CBN is to santise the system . We donâ€™t want a systemic failure because the capital market is currently on the verge of recovery.
The action by the CBN is to the best interest of the nation There is no cause for alarm as the new managing directors of these banks have a mandate to fulfill.
Mr. Dipo Williams, President of CIS said, â€œ before now we have had discussion with CBN and other regulators over the margin loans by stock broking firms and it has been cordial.â€
While answering questions if the CBN is likely to descend on the stockbrokers over the margin facilities, he said, I donâ€™t think any of our stock-broking firms who genuinely took the loan from the banks will be harassed.
They made full disclosure. I donâ€™t think any of our members would be harassed undulyÂ Â as we have been asking for a restructuring of the loans.â€