TWO foreign investors, allegedly pre-selected by the Central Bank of Nigeria (CBN) for the planned sale of five banks in the country, may have turned down the offer, going by indications emerging from London, United Kingdom (UK). They were slated to invest in Intercontinental Bank Plc and Afribank Plc.
Three others who could have taken over stakes in Oceanic Bank Plc, Finbank Plc and Union Bank Plc were said to have also developed cold feet and requested more time to make further consultations.
The development contradicts the statement by the CBN governor, Sanusi Lamido Sanusi, that the apex bank’s roadshow in London last week was not with the objective of selling Nigerian banks to foreign investors.
Sanusi reportedly explained that the London forum was scripted to explain the new banking reforms in the country to the international community.
But sources from UK and the organisers of the recently – conducted roadshow confirmed that a pre-selection exercise for foreign investors had been conducted in July by the apex bank.
Indeed, Sanusi had on three major occasions confirmed CBN’s plan to offer the shares of Nigerian banks to foreign banks. These affirmations were made in an interview with a national daily (not The Guardian); during his recent visit to the Democratic Republic of Congo; and even at the London forum itself.
The Guardian gathered that the two investors lined up for Intercontinental Bank and Afribank declined on the strength of advice given by their respective diplomatic missions in Nigeria.
Also, their foreign ministries were said to have qualified the unfolding actions of CBN governor as “controversial” and therefore advised the investors to be cautious about the investment plan.
The two investors, according to sources in London, consequently declined the CBN’s offer, with a qualified pledge to review their respective stands, when the investment plan becomes less controversial.
The other three investors lined up for Oceanic Bank, Finbank and Union Bank deferred confirmation of taking up the stakes when their respective home countries equally expressed skepticism about the deal and advised against it.
After the London roadshow, the investors merely told CBN officials that they would make more consultations, which sources said, would involve intelligence appraisal of the situational factors surrounding the current reforms in Nigeria’s banking sector.
But sources from CBN indicated that a new group might have started staking interest in the five banks.
This group, according to the sources, is made up Nigerian businessmen and politicians, who may use some foreign companies as fronts. Listed among the promoters in this group are two former governors, five visible politicians and three prominent businessmen, who were said to have been in London for the roadshow.
Former managing director of a bank in Nigeria, who spoke with The Guardian on condition of anonymity, confirmed the plan of these Nigerian politicians and businessmen to take over stakes in the banks.
“My worry is the modus operandi being used to acquire stakes in these banks. I do not know how they plan to take the shareholders of the banks along. There are procedures for such transaction and I believe it is beyond the powers of CBN to effect it without due process.
“Also, it may run counter to CBN’s recent pledge to ensure the quality of the investments, as the apex bank itself had vowed to ensure that funds from untoward sources would not be allowed to get inroad into such otherwise legitimate business.
“But with the interest being shown by these politicians, who I learnt are from the ruling party and from a section of the country, the banking investment portfolio may soon be awashed with toxic assets,” he said.
Former President of the Chartered Institute of Stockbrokers (CIS), Mr. Dipo Aina, had earlier called for a review of the proposal to sell the nation’s alleged troubled five banks to foreign investors, saying the move was ill-advised.
He said the resort to foreign investors to solve the nation’s financial industry problems was not the best approach.
According to Aina, the foreign roadshows by the CBN have given room for speculations on the real motive of the reforms.
“Nigerians need more information on the health of all the banks, but the CBN is not responding to that information.
“CBN must publish all the results for us to appreciate where they are coming from and how it intends to handle it,” Aina said.
The Managing Director of Compass Securities and Investment Limited, Mr. Emeka Madubuike, described the plans by the CBN to sell the five banks to foreign investors as an illusion.
“While we don’t know yet how CBN wants to do it, I feel it is a serious issue because of the subsisting laws moderating the selling of any quoted company.
“Is CBN going to sell the five banks by creating more shares and or investment instrument?
“Has the sale been approved by a court that has prompted an emergency general meeting? Or how are the shareholders and the Nigerian Stock Exchange (NSE) going to be accommodated in the scheme of things,” Madubuike asked.
The National Co-ordinator of the Independent Shareholders’ Association of Nigeria (ISAN), Mr. Sunny Nwosu, had also stressed that Nigerian shareholders would resist any attempt to use the instrumentality of government to rob them of their investments.
“The CBN has shown serious disdain for shareholders and the law governing investments in its banking reforms. “The CBN cannot think for us, but should use the normal procedure in leveraging our banks,” Nwosu said.
Nwosu described as uncharitable the ridiculing of Nigerian shareholders few years after they provided more than 75 per cent of the seed funds in the consolidation of the nation’s financial industry.
In a related development, Sanusi yesterday disagreed with the House of Representatives for raising eyebrow over the N420 billion bail-out given to the five troubled banks in the country.
A fortnight ago, Sanusi gave out the money to Union Bank Plc, Intercontinental Bank Plc, Afribank Plc, Finbank Plc and Oceanic Bank Plc on the ground that they had liquidity problems because of non-performing loans granted some customers.
As a result, the Northern Caucus of the House of Representatives, led by the Minority Leader, queried the bail-out, insisting it was not approved by the National Assembly as required by the 1999 Constitution.
Explaining the action of the CBN before the House Committee on Banking and Currency, Sanusi said there was nothing wrong in the steps taken by the apex bank because the CBN Act, which is a law made by the Legislature, empowers the bank to act in such a manner to save the economy of the country.
He said contrary to the position held by the lawmakers that CBN made expenditure from Consolidated Revenue Fund (CRF) of the Federation, the bail-out is not an expenditure, but a loan, which is an investment.
“I agree with you that expenditure from Consolidated Revenue Fund should be approved by the National Assembly and I acted in accordance with the CBN Act and this Act is a law made by the National Assembly. So, I have obeyed the law of the National Assembly. I have not acted in isolation of the National Assembly because you approved the law”, the National Assembly authorised me through this Act”, he said.
The CBN boss added: “The section of the Constitution you are quoting talks about expenditure but the bail-out is not an expenditure but a loan that will be paid back by the banks. We did not spend any money from the consolidated fund.”
“All central banks in the world that give money to banks in times of crisis do not require appropriation and Appropriation Act in any year do not include the amount of money that the Central Bank can lend to banks as part of the function of lender of last resort.
“Mr. Chairman, we did not spend any money from the consolidated revenue fund of the federation, which is what is covered by the budget. And Mr. Chairman, as it relates to other public fund, it is clear from the Constitution that withdrawals can only be made where such withdrawals are authorised by an Act of the National Assembly, and the CBN Act was an Act of the National Assembly.
“And section 42 (2) of the CBN Act passed by the National Assembly says: ” Notwithstanding the provisions of section 29 (1c) and 34 (d) of this Act, the bank may grant loans and other accommodation facilities at such rate of interest and on such terms as the bank may determine to any bank which may be having liquidity problems. The National Assembly authorised me by this Act to do it sir”, he said.
Earlier, Chairman of the House Committee on Banking and Currency, Ogbuefi Ozomgbachi, had challenged the CBN governor to refer the committee to any section of the Constitution which grants the CBN any special exemption from the binding effect of the relevant sections of the Constitution.
“The CBN Act cannot supersede the Constitution and therefore any action taken pursuant to the CBN Act that is inconsistent with the provisions of the Constitution is null and void, ineffective and of no effect whatsoever”, he said.
Meanwhile, the Economic and Financial Crimes Commission (EFCC) is currently looking into the share purchase transactions of the five banks whose managing directors were removed recently by the CBN.
The aim, The Guardian gathered, is to determine if there was any underhand dealings by the sacked CEOs and the other banks’ chieftains currently under trial.
Speaking to The Guardian on phone yesterday, the Commission’s spokesman, Femi Babafemi, explained that the anti-graft agency has an intelligence report which indicated that some of the banks’ helmsmen prior to the public offer which marked the consolidation era, mopped up their respective banks’ shares in the capital market, and equally gave out the banks’ funds for other people to purchase.
The Inspector-General of Police (IG), Ogbonna Onovo, may have also approved more mobile policemen for the EFCC.
The Guardian learnt that the action was prompted by the large areas the agency is expected to cover in its investigations.