ABUJA — THE Central Bank of Nigeria, CBN, Governor, Malam Sanusi Lamido Sanusi, has said the apex bank will  complete the process of recapitalizing the eight commercial banks it rescued from collapse in 2009 by the middle of the year.

According to him, at least four banks will complete memorandums of understanding with new investors within the next few weeks.
The CBN fired eight chief executives of banks in 2009 and bailed out the industry with N620 billion ($4.1 billion) following a debt crisis triggered by defaults on loans to buy shares.

A state-owned company, Asset Management Corp. of Nigeria, established last year to buy bad debts from the lenders, purchased debts valued at N1.04 trillion from 21 of the country’s 24 banks on December 31.

N50bn sinking fund

Meanwhile, the CBN has set up a “Sinking Fund” with a total contribution of N50 billion to stabilise the financial system.
Dr Kingsley Moghalu, the CBN Deputy Governor, Financial System Stability, disclosed this in an interview with the Europe Correspondent of the News Agency of Nigeria, NAN, in London.

“We have set up a ‘Sinking Fund’ that will receive contributions over the next 10 years to back up Assets Management Cooperation of Nigeria, AMCON.

“The Fund will include contributions from the CBN annually for the next 10 years and contributions from all the commercial banks at 0.3 per cent of their total asset annually,” Moghalu said.

He said AMCON in December bought nearly N800 billion of non_performing loans off the books of banks and would continue to purchase more non_performing assets in the first quarter of 2011.

Moghalu, however, noted that the purchases of non_performing assets did not completely take the banks out of the woods He expressed optimism that the fund should be able to raise not less than one trillion naira in 10 years.

Moghalu further explained that the fund was an additional back up that would stabilised the financial system, but that at no cost to the treasury, fiscal resources of the country or to the tax payer. He described the fund as part of the ‘very important’ reforms that was ongoing in the banking and financial sector. According to him, at end of the year, the CBN will be in a position to assess the first stage of the reforms.

Moghalu said as part of the ongoing reforms, the CBN in collaboration with the Securities and Exchange Commission (SEC) recently, issued a joint framework rules on merging lending.

He recalled that the non_existence of such rules became a major source of destabilisation of the banks in the last few years.
“There are clear rules and guidelines for lending in the stock market, whereas, before the reforms by the CBN, there were no rules on merging_lending and that was part of the problems,” he said.

Moghalu said that not more than 10 per cent of loans from banks could go to merging trading in the stock exchange.

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