"A circular released by the Central Bank of Nigeria has listed prominent Nigerians and their companies as chronic debtors who have refused to pay up debts they owe to banks. The circular which listed 113 companies and 419 directors/shareholders directed banks not to extend further credit facilities to the defaulters. Prominent among the blacklisted names and companies are Femi Otedola, Alhaji Sayyu Dantata, Sir Johnson Arumemi-Ikhide, former Power Minister, Prof. Bart Nnaji, Mrs Elizabeth Ebi and Dr. Wale Babalakin. The debtors have refused to pay back their loans despite the purchase of the debts at an agreed price by the Asset Management Corporation of Nigeria (AMCON)." -Dr Austin Ejaife Blog
“Deposit Money Banks are prohibited from approving or disbursing any new credit facilities to all persons and organisations on this list with effect of the date of this circular, until full liquidation of agreed indebtedness to Asset Management Corporation of Nigeria (AMCON),” according to the circular signed by Central Bank Of Nigeria (CBN)’s Director, Banking Supervision, Mrs. A. O. Martins.
The CBN circular titled 'Prohibition of New Credit Facilities To Debtors of the Asset Management Corporation of Nigeria (AMCON), also stated that “In the initial instance, this restrictions shall apply to individuals, organisations, companies as well as principal shareholders and directors of companies where the outstanding value of loans purchased by AMCON amounted to N5 billion or above as at the day of purchase, without regard to the actual amount paid by AMCON.”
The breakdown of the bad debts:
The $1.2 billion(N192 billion) is owed by Otedola’s Zenon Petroleum & Gas Ltd
MRS Holdings Limited, owned by Dantata (N119.98bn);
Seawolf Limited (N98.32bn);
Arik Air Limited, owned by Arumemi-Ikhide (N85.481bn);
NITEL Plc/M-Tel (N71.547bn);
Capital Oil and Gas Limited, owned by Ifeanyi Ubah (N48.014 billion).
Falcon Securities (N162.9bn);
Rockson Engineering Limited, also owned by Arumemi-Ikhide (N60.475bn);
BGL Securities (N6.44bn); Rahamaniyya Oil & Gas Limited (N46.38bn);
Bi-Courtney Limited (N20.214bn);
Geometrics Engineering, owned by Bart Nnaji (N19.76bn);
Aero Contractors Company, belonging to the family of Olorogun Michael Ibru (N32.579bn);
Tinapa Business Resort (N18.509bn).
Nestoil Limited, owned by Ernest Azudialu (N13.506bn);
Dorman Long Engineering (N9.667bn); Ascott Offshore Nig. Ltd, owned by ex-banker,
Henry Imasekha and the Berkley Group (N64.728bn);
Gitto Constuzioni owned by the late Italian road builder(N11.838bn);
Dansa Foods (N14.880bn) whose directorsaer Sani and Abdul Dangote, brothers of billionaire business magnate, Alhaji Aliko Dangote.
Commercial banks were also prohibited from granting further credit to Cross River State and Zamfara State owing to the refusal of the Tinapa Business Resort and the accountant general of the Zanfara State Ministry of Finance to pay back their respective loans.
Sources: PM News, ejaife.wordpress.com
Central Bank of Nigeria (CBN) have infused the total sum of N600 billion naira ($3.96 billion) into the Nigerian banking sector to recapitalize the banks that have been plagued with liquidity crisis and credit crunch caused by excessive lending, profligacy and corruption.
The recent audits of the Nigerian banks by the Central Bank of Nigeria (CBN) have exposed the inefficiency of the banking sector. When the new governor of Central Bank came in he found out that some major banks were poorly managed and that corruption has eaten deep into the fabric of Nigerian banking system. Therefore the boss of CBN Mr. Sanusi Lamido Sanusi committed himself into cleaning the financial mess.
Mr. Sanusi Lamido Sanusi the newly appointed chieftain of CBN conducted initial audits of the some of the banks. "Those audits revealed that five banks holding 30% of Nigeria deposits – Afric Bank, Fin Bank, Intercontential Bank, Oceanic Bank and Union Bank were on the brink of collapse due to reckless lending." There was a lax in the system and it was revealed that many loans made to some of the banks’ customers were neither repaid nor serviced but were left dormant.
The CBN bailed out the five banks with 400 billion naira. The managers of the banks were sacked and those customers including many important business tycoons and respectful bureaucrats were compelled to pay back those bad loans.
The governor of Nigeria’s apex bank Mr. Sanusi Lamido Sanusi went further with comprehensive investigation and audits of the entire banking sector. The audit findings including: lax in regulation, credit strangulation and low holdings among many banks. Due to the plunge in the deposit holdings among many of these banks, there was credit crunch in the system. The business cannot raise adequate capital from the financial institutions due to paucity of liquidity in the system.
Again the Central Bank of Nigeria on October 2 recapitalized another four banks at the amount of 200 billion naira - "Bank PHB, Equatorial Trust Bank, Spring Bank and Wema Bank -- also judged to be facing a grave liquidity risk."
Replenishing the holdings of the banks was a great move by the CBN, for that will make credit available to the business community and consumers. But that will not be the panacea to the problems of the Nigerian banks, which compels a comprehensive and invasive restructure of the banking system.
Sansui‘s Central Bank must re-evaluate the rules and regulations and come with more stringent regulations that will close all the loopholes in the system. The regulations must be enforced aggressively with verifiable checks and balances. The frequency of the audits must be increased together with random audits can become a deterrent mechanism to inhibit the weakness in the system.
Re-capitalization and bail out of the banks with this large sum of money - N600 Billion naira -may loom inflation. At the moment in Nigeria the inflation is hovering around 10-10.4% and it’s expected to dip below 10% in the next quarter. Therefore the commercial banks must be instructed to be meticulous in their lending in order to avoid excessive money in the circulation that might trigger inflation. Subsequently undermining the value of naira and further depreciation of already weaken naira.
When CBN prints and borrow money to recapitalize the banks that may lower the Nigerian credit worthiness. And it may unleash higher inflation and the devaluation of naira. When CBN finances its recapitalization by withdrawing excessively from the foreign reserve, it poses a threat to value of naira and credit standing of the country.
Mr. Emeka Chiakwelu is the Principal policy strategist at Afripol Organization. Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.
Nigeria has a new Minister of Finance, Olusegun Aganga a managing director at Goldman Sachs branch in Britain. Aganga, a free marketer has a substantial experience in private industry together with his academic brilliance, he can efficiently manage and oversee Nigeria’s financial house. The minister of finance must be ready and keen to make sure that Nigeria will not fall into the trap of large external debt and higher inflation. This is important because Nigeria should not be throw back to the gloomy days of large foreign debt. Nigeria was overwhelm with the incireasing interest rates and arrears accumulated by the servicing of the foreign debt.
Nigeria external debt is currently over $5 billion dollars. Many Nigerians will be surprise to hear that Nigeria is still an indebted nation after she exited from the debt of Paris Club and London Club in 2006. Nigeria finally settled her debt of $36 billion but most Nigerians might think that Nigeria is forever free of external debt. But a thriving nation is likely to be in debt provided that the available credits are invested appropriately for creation of further wealth and improving the well being of the nation. Nigeria should try to establish criteria and benchmark for borrowing, at least to make sure that her debt does not exceed 2-3% of her GDP.
Nigerian Minister of Finance, Olusegun Aganga
In December of 2009, the former minister of finance, Mansur Muktar highlighted the state of Nigeria’s debt: "Nigeria’s exit from the Paris Club debt in 2005/2006, the external debt stock dropped dramatically and substantially from $35.94 billion to $3.54 as at the end of year 2006 but rose to $3.947 billion at the end of December 2009, including the $3.686 billion obtained from multilateral organizations namely World Bank, African Development Fund (ADF), International Development Association (IDA) and African Development Bank (AfDB) which has 40 year repayment period and 10 year moratorium period." It is essential that this is conveyed to average Nigerian taxpayers so that they become watchdogs to the finance of their country.
Also making the clarion call of country’s debt is Dr. Ngozi Okonjo-Iweala, the managing director of World Bank and the former finance minister of Nigeria. Okonjo-Iweala was among the principal leaders that facilitated and guided the country’s successful exit from both Paris and Club of Creditors in 2006. Recently in a lecture at University of Calabar she said, "In April 2006, Nigeria paid off the last installment due on its debt settlement agreement with the Paris Club, thereby erasing 30 billion dollars in external debt and reducing government external debt to 3.5 billion dollars."
Therefore the new minister of finance, Olusegun Aganga should deliberately and carefully monitor the country’s debt. The minister must closely work with Sanusi‘s Central Bank of Nigeria to tame inflation which can easily frustrate economic growth and further weaken the depreciating naira. Nigeria is issuing bonds to raise money for infrastructures development. Aganga must get involve and make sure that money raised will not be wasted and the burden of the debt passed down to powerless Nigerians.