By Babajide Komolafe
LAGOS—THE Central Bank (CBN) yesterday moved to ascertain the level of toxic loans in the banking industry as it ordered banks and discount houses to submit, within four day, details of all their loan exposure especially Bankers Acceptances (BAs) and Commercial Papers (CPs) to  and Virgin Nigeria Airways (VNA). It also ordered banks and discount houses to submit schedules of all BAs and CPs of N20 million and above bought and sold for counterparties.

Commercial Papers and Bankers Acceptances are money market instrument used by banks to raise money for companies. Banks however abuse these instruments by using them to conceal non-performing loans.

Sir Richard Branson of Virgin Nigeria Airways (VNA) and (Mrs)Ndi Okereke – Onyiuke, Chairman of Transnational Corporation (Transcorp)

The Nigeria Deposit Insurance Corporation (NDIC) however noted in several of its annual reports that banks create irregular CPs and BAs to understate their loans and advances and consequently boost their liquidity and capital adequacy ratios.

In a circular to all banks and discount houses signed by the Acting Director, Banking Supervision, Mr. D.A.N Eke, entitled: Submission On Details Of Exposures Including Commercial Papers (CPs) and Bankers Acceptances (BAs), To Transnational Corporation (Transcorp) and Virgin Nigeria Limited”, the apex bank stated, “All banks and discount houses are hereby requested to submit to the Ag. Director of Banking Supervision details of their exposures, including Commercial Papers (CPs) and Bankers Acceptances (BAs) bought and sold for counter-parties, in respect of:  Transcorp Plc and Virgin Nigeria Limited

“This information should reach the Ag. Director of Banking Supervision not later than
Friday, June 19, 2009.”

In the same vein, in another circular, the apex bank directed banks to submit details of all Bankers Acceptances and Commercial Papers of N20 million and above bought and sold for counterparties.

The circular entitled “Submission of Schedule of Commercial Papers (CPs) and Bankers Acceptances (BAs)” stated “All banks are hereby requested to submit to the Ag. Director of Banking Supervision a schedule of their Commercial Papers (CPs) and Bankers Acceptances (BAs) of N20 million and above bought and sold for counter-parties.

The details should include the names of the counter-parties and the amounts involved. This information should reach the Acting Director of Banking Supervision not later than Friday, June 19, 2009.”

The directive to banks to submit details of exposures to Transcorp and Virgin Nigeria is seen as an attempt to ascertain the level of banks exposure to the two troubled organisations.

Vanguard investigation revealed that the apex bank might insist that banks make full provision for loans granted these organisations, an action that would affect the performance of many banks.

Virgin Nigeria is engulfed in a crisis of survival which involves UBA Plc, one of the nation’s largest banks.

The company is indebted to UBA to the tune of N203.5 billion.
Transcorp on its part has also been engulfed in one crisis or the other since inception especially with respect to majority stake in NITEL/MTEL. Already the federal government has revoked the sale of the two companies to Transcorp thus increasing the company’s woes.