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Rescued banks pay N17bn interest on bail out money

By Babajide Komolafe
The eight rescued banks  have  so far paid nothing less than N17 billion as interest on the N620 billion bailout money received from  the Central Bank of Nigeria (CBN). Meanwhile one of the banks,  Equitorial Trust Bank last week  fully repaid the bailout money with N700 million interest.


The eight banks are Afribank PLC, Finbank PLC, Intercontinental Bank PLC , Oceanic Bank PLC, Union Bank PLC, Spring Bank PLC, Equitorial Trust Bank and Bank PHB PLC.

Vanguard investigations revealed that the N620 billion injected into the banks  initially attracted an interest rate charge of 11 per cent (MPR plus five per cent)  which was later reduced to 8.0 per cent following general decline in interbank interest rate.

Investigations also revealed that Equitorial Bank has repaid the N30 billion bailout money injected by the apex bank. Investigation revealed that the bank paid a total 30.7 billion. It was gathered that the extra N700 billion paid by the bank was the interest charge on the bailout money. It was gathered that the apex bank debited the bank twice for the interest payment. It was gathered that the CBN first debited the bank N500 million sometime in November and  another N200 million in December.

Further investigations show that the same treatment was applied to the other seven rescued banks and that in the case of the Afribank, Finbank, Intercontinental Bank, Oceanic Bank, and Union Bank which received N400 billion bailout money earlier the interest  charge  have been deducted monthly. A source in one of the banks told Vanguard that the apex bank just debit the account of the banks for the interest charge and that the total interest payment so far is even more than the N17 billion.

But CBN source told Vanguard that the interest charge was part of the conditions attached to the bailout money. According to the source, the banks signed an agreement with the CBN for the bailout money which included interest payment.

Further investigations revealed that apart from Equitorial Bank, the other rescued banks have started repaying the bailout money in bits and pieces. A senior treasurer in one of the banks said that though the banks have been making money with the bailout fund, there is a stigma cost attached to it hence the banks are making efforts to exit from the fund.

In fact at a recent parley with journalist, Afribank executive directors said that the bank had fully repaid  50 per cent of its expanded discount  window borrowing from the CBN and was in a position to actually repay the bailout money injected by the apex bank.

A former top official of the CBN who spoke on condition of anonymity while confirming the interets payment criticise the apex bank for  subjecting the rescued banks to such huge interest payment on one hand and directing them to cut cost by sacking staff.

“You are asking them to cut cost but also subjecting them to heavy interest payment. which is more important, the interest payment or the massive lose of jobs with wide ranging negative effects on the economy. The CBN and the federal government should be more interested in saving jobs in the banks that collecting interest payment from them”, the source said.


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