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Shareholders warn CBN on sale of banks

By Babajide Komolafe and  Peter Egwuatu

Say it is illegal
Shareholders’ groups across the country and financial experts have described the ongoing move by the Central Bank of Nigeria (CBN) to sell the five troubled banks out rightly to foreign investors as a step into illegality.  The CBN they averred has no right under the law to sell any bank in the country.


The Shareholder groups and financial experts have warned that it is illegal for the CBN to sell the banks and have also vowed to resist any such move. They said that under the Companies and Allied Matters Act (CAMA), which applies to all corporate entities in the country, it is only the owners of a company that can sell the company, and this is after a resolution to do so at an extra-ordinary general meeting.
In an interview with Vanguard, Sir Sunny Nwosu, National Coordinator, Independent Shareholders Association of Nigeria (ISAN) said “the CBN in the first place is not the owner of the banks that they said would be sold to foreign investors. The apex bank has no legal right to sell any publicly quoted bank to any foreign investor. I think they are going beyond their responsibility.

The CBN’s responsibilities in the economy is among others to ensure monetary stability, regulate the banking industry to ensure that the banks perform the expected role they are expected to play to spur growth and development of the country.

Other functions of the CBN include: Keeping and maintaining foreign exchange earnings for the country, lender of last resort to the banking industry etc. They are not meant to sell any bank that is not performing but has the power to discipline bank officials as well as issuing and  withdrawing bank license.  So at the moment, we are going to keep our eyes on the banks and see how the CBN is going to sell the banks and then we would look for a way we can resist it.

CBN Governor, Sanusi
CBN Governor, Sanusi

Speaking in the same vein, Chief Timothy Adesiyan, President, Nigerian Shareholders Solidarity Association of Nigeria (NSSA) said, “At the moment, the CBN has no shares in these banks. How can CBN or government sell what it does not own? The shareholders are the owners of these banks and should be consulted before taking any action to sell the affected banks.

Mr. Adebayo Adeleke, General Secretary, Independent Shareholders Association of Nigeria (ISAN) explained, “ The CBN has no right whatsoever to sell any privately or 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, and then what right has it to sell what it does not own. There are procedures to be followed for bank’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 an Extra Ordinary General Meeting (EGM) where a resolution would be passed 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.

Speaking further, he noted that, “ the CBN is only acting on the provision of banks and Other Financial Institutions Act (BOFIA) where they got the power to remove the banks’ chief executives. But the BOFIA, to my knowledge did not give the CBN  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.”

Corroborating the position of the shareholders’ groups, Managing Director/Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck Rewane, a former Director in one of the regulatory authorities and a Senior bank treasurer stressed the need for transparency in the process of raising fresh capital for the banks.

Rewane said, “The CBN did not say it is selling the banks to foreigners. The issue is when the capital of a bank is impaired due to bad loans, you need to raise capital to fill in the capital eroded. And if capital has to be raised the existing shareholders should be asked to bring in money to fill the shortfall. If they cannot bring the money, then you do a share offer and if this is not successful, you can then ask a core investor to come in with fresh funds.

All across the world it is natural that if a bank is troubled and the capital impaired the owners must bring in new capital. It is not the responsibility of the CBN  but in this case because the CBN intervened in the banks, it is involved in the process. However the most important thing is that the process should be transparent because you are not selling a public property but something that belongs to private individuals. You are only intervening in public interest.”

A former director in one of the regulatory bodies who spoke on condition of anonymity also said that, “When the capital of a bank is eroded you ask the existing shareholders to bring in money, and you give them about six months to do so. And if there is need to raise new capital or bring in new investor  you go to the stock market and make it open to everybody, whether local or foreign investors. In this case it doesn’t matter where the investors are coming from”

A senior bank Treasurer also called for caution saying, “Since the problem of the banks arose from bad loans, the issue of recapitalisation won’t matter again if the banks can recover these loans, except if the CBN is creating a new asset base for the banks in terms of the size of the capital base. But globally it has been proven that efficiency and not size is what matters. But if there is need to bring in new investors, the CBN should let us know who these investors are. And moreover, why the focus on foreign investors or banks? Why not investors from inside/ after all these foreign banks have shown to be worse than us.”

Since the sacking of the Chief Executive Officers and Executive Directors of Intercontinental Bank, Oceanic Bank, Afribank, Union Bank and Finbank, the CBN governor, Mallam Lamido Sanusi has repeatedly said that the apex bank is open to the acquisition of the banks by foreign investors.
First, during the press conference on Friday August 14 where he announced the sack of the banks’ CEOs, the CBN governor, in response to a question by the Financial Times correspondent on the possibility of new investors especially foreign banks taking over the banks, said that the situation of the banks is an opportunity for new investors to come in and that the apex bank is open to the acquisition of the banks by any foreign banks.

Similarly, at the Road Show organised by the CBN in London two week ago, that the apex bank said it was ready to sell Union Bank, Intercontinental, Oceanic, Afribank and FinBank, 100 per cent to foreign investors.  Sanusi who was quoted by Reuters while speaking in London at the conference said he would not “stand in the


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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.