By Omoh Gabriel
This article was first published in this column on 9th August 2011. Due to recent development, it is being re-published. When the ongoing reforms in the banking sector started, many Nigerians expressed reservations as to the fairness, of the exercise. Two years down the line, many still entertain those fears.
The CBN has not been able to remove the doubts in the minds of many. Expectations were that once the list of chronic debtors in these banks was published, they will rush and pay up, the banks will be better off.
Some did pay and one in particular had the assets confiscated. Today, as the banks sign transaction implementation arrangement with would be core investors who fortunately are local banks, the question of the recovered and forfeited funds are begging for answers.
The case of Oceanic Bank comes out stronger than many others. The Economic and Financial Crimes Commission had prosecuted the exCEO on a 25count charge of financial crimes before she entered a plea bargain deal with the antigraft agency in October 2010.
The Chief Judge of the Federal High Court, Justice Dan Abutu, convicted the CEO on a threecount charge and ordered the forfeiture of N191 billion assets comprising 49 properties in Nigeria, United States and Dubai, United Arab Emirates, to a Federal Government agency, the Assets Management Corporation of Nigeria which was yet to take off and it did effectively in December 2010.
The forfeited properties include shares in over 100 firms some of which are listed and some not listed on the Nigerian Stock Exchange. The anti-graft body had earlier told the court that there was an agreement and urged the court to forfeit the properties attached to section VI of the settlement agreement to AMCON. The assets set out in section VI of the settlement agreement are hereby forfeited to AMCON.
To the ordinary mind who is not a banker, Oceanic Bank has had an injection of N602 billion into it whereas the nonperforming loans for which the CBN intervened in the bank was N278 billion. The assets forfeited amounted to N191 billion.
The non performing loans the bank was carrying was N278 billion by CBN books. It is this amount that eroded the shareholders funds to negative position. Now, the CBN intervened in the bank and rescued it with N100 billion.
AMCON bought the bank’s nonperforming loans to the tune of N200 billion in bonds. The bank in November 2010 said that it had recovered N111.4bn from bad debts as at the end of the third quarter and had written back N14.8bn.
It made a profit of N10.247 billion which was retained. Going by the figures that are in public domain, even if the CBN continues to hold onto the N191 billion forfeitures, what has happened in the last one year seems to suggest that the bank should be on sound footing.
The N200 billion sale of nonperforming loans to AMCON effectively reduced the bank’s bad debt to N78 billion.
If it recovered N111.4 billion which is now profit due to the previous provisions for non performing loans, then it would have further reduced the nonperforming loans from the outstanding N78 billion to a positive figure of N33 billion.
The retained profit increased its holding to N43 billion. What the bank said it needed as fresh capital was N25 billion minimum required by the CBN.
It would have had more than that about N43 billion. I am not talking about the CBN N100 billion injections which are tier two capitals that should take some five years to pay back.
According to John Aboh, the CBNappointed Managing Director of the bank, the nonperforming loans to total loans and advances of the bank dropped from 73 per cent to 69 per cent, while loans and advances plus advances under finance lease stood at N420.2bn as at September 30, 2010, up by 7.5 per cent from N391bn in December, 2009.
John Aboh had also said: ‘Our turnaround programme continues to yield good results; we are keeping operating costs in check, pursuing NPL recoveries aggressively and focusing on risk management’.
AMCON by its charter is supposed to bring the negative Shareholders’ Funds (SHF) of the rescued banks to zero, to allow for injection of fresh capital from strategic investors. It was in furtherance of this that the bank concluded the sale of some of its nonperforming loan portfolio to AMCON and received bonds worth over N200 billion in exchange.
But the curious thing is that the N191billion forfeiture is hanging somewhere, ostensibly warehoused by AMCON. For what reason, nobody except the CBN and EFCC can explain. If the N191 billion is given directly to Oceanic Bank, it would require no additional capital to be fully back to business.
Lawyers and other stakeholders have faulted Central Bank of Nigeria’s (CBN) decision to hand over the asset forfeited by the bank’s former chief executive officer to Asset Management Corporation of Nigeria (AMCON), saying AMCON has no business in the recovered funds.
John Aboh had said that the bank will pursue a fourpronged recapitalisation plan to achieve the N25 billion minimum capitalisation required for national commercial banks.
These include: organic means through profit from operations, sale of assets to the Asset Management Corporation of Nigeria. If CBN/EFCC/AMCON have not held on to the N191 billion forfeiture of the former MD of the bank will the bank not have achieved the N25 billion required by Aboh to retain national bank status without the sale of the bank to Ecobank?
Ordinarily, the said forfeited assets were appropriated from the bank as opposed to her personal property and as such, should be returned to Oceanic Bank to add up to the bank’s liquid assets.
AMCON in the first place was not in existence when the crime was allegedly committed and the fund recovered should be paid back to the bank’s vault to further boost its liquidity.
Shareholders of the bank had warned the Economic and Financial Crimes Commission (EFCC) and CBN to stay off the funds, warning that the yettotakeoff AMCON has no moral or legal basis to appropriate the recovered funds.
Ibru was sacked by the CBN along with the managing directors of four other banks on August 14, 2009 following allegations of corruption, bad corporate governance practices and mismanagement of public funds. The CBN, EFCC and AMCON have a lot of explaining to do.