By Peter Egwuatu
Barr. Raymond Anyiwo, Chairman, Consolidated Shareholders Association of Nigeria
What is your reaction on the recent move to sell the five banks to foreign investors?
It is a welcome idea , provided the CBN in its investigation has discovered that the former management of these five banks were not capable to lead the bank to greater height. Our shareholdersâ€™ group is in support of the sale of the shares to be created following the bail out of N400 billion given to these banks. But if the move by the CBN is to sell the entire banks, that is, selling both existing shares and the new ones to be created to foreign investors, then we would resist it to the fullest.
Are you in support of the ongoing reforms in the banking sector?
Of course, our shareholders are in support of the ongoing reforms because we donâ€™t want our bank to fail and collapse. If the reform is meant to strengthen the banks then we are in full support.
It is a good decision for the CBN to bring in foreign investors to have some stake in the banks. As long as its motive is to sell the shares to be created in the long run to enable it recover theÂ money injected to bail out these banks, then we welcome it. However, we are going to resist the move for outright sale of the entire banks. Our belief, is that ,the CBN will create new shares to the tune of the amount injected and by bringing in foreign investors, to take up those shares so as to enable them exit when the banks would have stabilized.
It is only in this circumstance that , the foreign investors will bring in their technical expertise and knowledge to drive these banks to higher level.By bringing in their sound technical knowhow and huge capital, the banks will expand and be able to do business effectively and efficiently. With sound technical know how the foreign investors would turnaround the banks, which will further lead to ripple effect, such as creating employment, declaration of higher profit and dividend.
Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria (PSAN)
What is your reaction on the proposed sale of the five trouble banks to foreign investors?
I donâ€™t think the CBN wants to sell the five banks. I think why the CBNÂ went to London together with the five new chief executives of these banks was to assure them of public confidence and the soundness of the banks. But if it turns around to sell the banks we are going to resist it with every available legal means.
Does the CBN has the right to sell the banks ?
The CBN has no right whatsoever to sell any bank. CAMA has not given the CBN the right to sell any bank. It can only regulate and monitor the banks so that they do not derail from their primary responsibility of financial intermediation. On what basis does it want to sell the banks.? Does CBN nor the government own any shares in the banks. So CBN cannot sell what it does nor have. If it does, then we vow to use the legal means to stop such corruption.
What are the procedures in selling a bank that appears to be heading to extinction?
Well, the process of selling any company that is witnessing sign of distress isÂ that the board of directorsÂ will have to call for an Extra Ordinary General Meeting (EGM) where the existing shareholders will endorse the resolution to either sell the company or create new shares.
The establishment of any company is derive from CAMA . So CAMA has stipulated the procedure to create new shares or sell any company. In that case I donâ€™t see the CBN selling any bank. The CBN can only create new shares to bring in the foreign investors to the tune of money given to bail these banks. Even at then, it must get the nod of existing shareholders to do that through the EGM. There are no specific roles assigned to shareholder members on the audit committee.
On the issue of corporate governance, to this, would you say Nigerian companies are observing best practices and the regulators ensuring that this is done?
The regulatory authorities have always been saying thatÂ companies should adopt corporate governance but they have not been enforcing it on the companies. Some company will declare dividend and they would not pay promptly. Under normal circumstances when dividend is declared immediately it must be paid within seven days, after it is declared but some companies does pay as as when due because they donâ€™t have the funds. TheÂ regulatory authorities should always ensure that they enforce it that if you donâ€™t have the funds, you donâ€™t declare dividends.
The external auditors have also been accused of compromising in their auditing role in these troubled banks, does the audit members that the shareholders belong share the same blame?
There are no specific roles assigned to shareholder members on the audit committee. The responsibility to detect any misdemeanour lies with the CBN. â€œDo shareholders run the banks? What were the CBN resident examiners doing when these banks were defying the single obligor limit and depleting their shareholders funds?
In fact, audit committees work based on figures sent to them by the management The ability to interpret figures is not enough criterion to qualify a person for membership of the committee. â€œEven accountants may not be bold enough to ask the right questions.Only if you are bold and can say your mind. I agree to some extent that people who can read figures should be selected but the integrity of the individual is more important.Then you can write a minority report if you find anything wrong.
Mr. Adebayo Adeleke, General Secretary, Independent Shareholders Association of Nigeria (ISAN)
What is the reaction of shareholders following CBN move to sell the five banks?
CBN has no right whatsoever to sell any privately and publicly owned bank. It can take disciplinary action against bank officials and impose sanction on banks that contravened its rules and regulation , but not to sell the banks. CBN is not the owner of these banks, then what right has it to sell what it does not have. There are framework to be followed for bankâ€™s shares to be sold. In the first place CBN has not created any shares to be sold in that bank. For a share to be created, there is a rule in place.
The Companies and Allied Matters Act (CAMA) states that for a share to be created in any public company , the board of directors of such company must call for Extra Ordinary General Meeting (EGM) where a resolution would be pass by the existing shareholders. But in this case with the CBN, it cannot create any share except the board of directors comes out with a resolution which must be approved by the existing shareholders.
You mentioned that the rule in CAMA must be followed for the creation of new shares, what is the position of Banks, Other Financial Institutions Act ( BOFIA)?
Well, the CBN is only acting on the provision of BOFIA where they got the power to remove the banksâ€™ chief executives. But the BOFIA, to my knowledge did not give the CBNÂ the right to create new shares for the banks. The CAMA is superior to BOFIA because it covers all companies other than the banks, while BOFIA covers only the banks and other financial institutions.
The CAMA has been in existence before the BOFIA. The Corporate Affairs Commission (CAC) that registers companies got their power from CAMA.
The CBN needs to go and read CAMA before taking any actions in these banks, especially regarding equity and ownership. We are waiting to see what the CBN is up to if they insist in inviting foreign investors to take up these shares.
What is the view of your association in the whole reform process of the banking industry?
Overall, Our shareholders group are of the opinion that the CBN approach has created crisis of confidence locally and interbationally for our ecmergimg economy.ur stand resolves around the fact thst inless cbn totally reviews its approach the collateral damange on the economy would rubbish our economic gains since 1999. We advocate for a CBN that will moderate the affairs of the banking institutions but chat a clear direction for a sustainable national economy that is capable of acctracting and sustaining foreign investors.
We suggest that in repositioning the nationâ€™s bankibg institution government and its agencies like CBN should demonstrate a high level of sensitivity which the industry requires and run the affairs of the institutions is a way and manner devoid of extraneous colorations.â€