By Babajide Komolafe
In apparent reflection of the effectiveness of the guarantee of foreign credits and interbank lending by the Central Bank of Nigeria (CBN)  and a vote of confidence for the on going bank reforms, the United States Export-Import Bank has renewed a $1 billion facility to 14 banks including four of the rescued banks.

The banks are Access Bank, Afribank, Diamond Bank, Ecobank, Fidelity Bank, First Bank, First City Monument Bank and Guaranty Trust Bank (GTB) Others are Stanbic IBTC Bank,     Intercontinental Bank, Oceanic Bank, Skye Bank, Union Bank and Zenith Bank.

The facility known as Nigeria Bank Guarantee  will allow Ex-Im Bank to rapidly approve qualifying short-term and medium-term transactions for Nigerian buyers of U.S. goods and services.

Under the new program, Ex-Im Bank will insure short-term transactions involving exports of consumer goods, raw materials, spare parts, commodities, and small capital equipment with a repayment period of 180 days. Ex-Im Bank’s medium-term insurance and guarantees are generally used for financing purchases of U.S. capital equipment and services with a repayment term of five years.

According to U.S Ex-Im Bank, “To facilitate Ex-Im Bank’s support of such transactions, a review of the Nigerian banking sector  was conducted which culminated in Ex-Im Bank’s Board of Directors approving a $1 billion dollar facility.

The bank further stated that, “A determinative factor in the renewal of the Facility was the significant and important steps that the Central Bank of Nigeria (the “CBN”) took to strengthen the Nigerian banking sector. In particular, in determining to renew the Facility, Ex-Im Bank’s Board of Directors noted and relied on the CBN’s declarative statement that it will not allow any Nigerian bank to fail, the results of the CBN’s special examination of various Nigerian banks, the support the CBN has provided to the banks that did not pass the review, and the CBN’s guarantee of the obligations of such failing banks.”

Financial Vanguard investigation revealed that the U.S Ex-Im Bank is exposed to obligations of four of the rescued banks to the tune of $182.866 million.

The banks are Afribank, Intercontinental Bank, oceanic Bank and Union Bank.In order to restore confidence in Nigeria banks following revelations of huge non-performing loans in the banks occasioned by exposures to energy sector and the capital market, the CBN guaranteed all interbank placement, deposit of pension fund custodian and foreign creditors.  Though the guarantee was schedule to elapse by March 31st 2010, the Monetary Policy Committee (MPC) of the apex bank last week decided to extend the guarantee to December 31st 2010.

In a statement issued to this effect the CBN stated, “Following the release of the communiqué of the 212th MPC Meeting on January 5, 2010, the Central Bank hereby provides the following additional clarification with respect to the guarantee of Inter-bank and foreign credit lines.

For the avoidance of doubt, the Central Bank remains committed to guaranteeing all foreign credit lines and interbank exposures up to December 31, 2010.

The Central Bank has reserved the right to keep all options open in its exploration of resolution options for affected banks, depending on the level of co-operation received from other stakeholders.

The Central Bank of Nigeria re-affirms that in each and every circumstance, all exposures to foreign banks and inter-bank takings will be fully repaid in the event of a decision to withdraw the guarantee before December 31, 2010.

The Bank will continue to take all necessary steps to protect creditors in line with its commitment in pursuing the safety and soundness of the Nigerian banking system.”