BY MICHAEL EBOH
The Federal Government of Nigeria would have only expended N500 billion to resolve the crisis in the banking sector if the central bank, CBN, had handled the issues in the banks and the financial sector properly, says Mr. Tunde Adeyemi, Managing Director, DHTL Capital Management Limited.

Adeyemi, in a paper titled, Issues and Market Development, presented at the 2011 national workshop of Capital Market Correspondents Association of Nigeria, CAMCAN, in Ijebu Ode, Ogun State, said the government, through the CBN, acted wrongly by sacking the management of the banks and publicising the issues in the banks.

He said the CBN would have called the management of the banks after identifying their true position, extend certain guarantees to them in the interbank window or additional funds to boost their operations, instead of sacking the banks’ executives and publicising their misdeeds.

He added that sacking the executives of the banks would have been a last resort and would have been done after the banks have found their footing.

Adeyemi blamed the problems in the Nigerian banking, capital market and the financial system in general on the regulators and their various regulations.

He said the huge amount expended on the intervention in the banking sector will bring about a significant rise in Nigeria’s internal debt profile, a development, he noted, is not healthy due to the fact that the funds would have been channeled into more productive ventures.

He also stated that the fund would have been used in bailing out a number of the stockbroking firms indebted to the banks.

Sanusi Lamido

This, he said, would have helped in stabilising the Nigerian financial system and stem the persistent decline in the capital market.

He said the stock market is in a state of disarray, with majority of the stockbroking firms unable to pay salaries and facing bankruptcy.

He called on the CBN and authorities in the capital market to immediately convene a meeting between the debtor stockbroking firms and the banks to discuss a restructuring of the loans and processes for the repayment.

Adeyemi’s statement is a response to emerging facts that both the CBN and the Asset Management Corporation of Nigeria, AMCON, have spent about N4 trillion in the resolution of the banking crisis since August 2009.

Both the CBN and AMCON have spent about N4.5 trillion, so far, in resolving the issue. Initially, the CBN had injected N620 billion as an intervention fund in the eight rescued banks which management were sacked in 2009, while AMCON said it has spent N1.725 trillion to acquire non-performing loans from banks in the country.

When it was obvious, according to the CBN, that three banks could not meet the September 30 recapitalisation deadline, the Bridge Banks option was used in acquiring the assets and liabilities of the banks, with AMCON injecting another N736 billion into the bridge banks to bring them to the minimum capital and liquidity adequacy level required by the CBN.

AMCON later injected N1.364trn in the remaining five rescued banks to bring them to a position of zero capital ahead of their acquisition.