There are no plans to nationalise banks, says Central Bank

Neither the Central Bank of Nigeria (CBN) nor the Federal Ministry of Finance has the intentions of nationalising any of the 10 rescued banks, a Central Bank official said last week.

Mohammed Abdullahi, head, corporate affairs department of the Central Bank of Nigeria, said that the ministry and the Central Bank were considering three possible solutions for stabilising the banks.

“The first is for foreign investors coming to invest in the banks and buy them up,” Mr. Abdullahi said.

“The second is to encourage acquisition and mergers by strong local banks in Nigeria. The third option is the one that government would acquire equity shares and then sell to the public at a later date, which is not nationalisation.”

According to him, the Bank is yet to take a final decision. “We are talking of three options now and we have not said that we have decided on any of these options,” Mr. Abdullahi added.

He said that the option of government buying equity shares is the last option and will only come into play if the first or second option fails.

“Of course, because we have our money in these banks, that is why we were able to appoint a new management because we have a stake in them but that is not to say that we have nationalised the banks”.

Mr. Abdullahi explained that a nationalisation process would include a public announcement of such major policy while the new management appointed by the CBN would have come from the public sector and not the private sector as it obtains now.

Though he did not say how many investors have indicated interest or the banks they are interested in. “We desire to have investors (and) they are already coming and we are still expecting more. They are coming on their own. That is why we appointed advisors, to help each bank choose the best option that would move them forward. Each bank has its own suitable option”.

Not the best alternative

Opeyemi Agbaje, an official of the Resource and Trust Company Limited, a finance strategy and advisory company said nationalising the banks would only lead to disaster.

“Nigeria has nationalised banks before, and we know what became of such banks, many of them failed,” said Mr. Agbaje.

“They became government parastatals and then the government started appointing their board of directors, their Managing Directors and then they now become like Nigerian Ports Authority and the rest. Nationalisation should be a no go area. We should look for private investors to take over the banks that are in trouble”.

“Technically, what the CBN is saying is that the Central Bank had to come in and capitalise those institutions because their previous management lost the capital to bad loans and frivolous transactions but the Central bank should not proceed to make that arrangement permanent as nationalisation would lead to disaster,” Mr. Agbaje said.

According to a bank official who asked not to be named, buying equity shares in the bank temporarily to stabilise them is not a bad idea, as long as there was a clear understanding of when the equity would be sold back to the private sector.

“We must understand that the government has a duty to save these banks from failing out rightly,” he said.

“The only concern that might arise is the needed assurance that the arrangement is temporary, and that there would be a clear timeline of returning the banks back to private investors. What is going to happen is that these reforms would create a new set of shareholders,” he said.

Buying into rescued banks

Reuters reported last month that the Finance Ministry said in a statement that the government may buy into the affected banks.

“In the event that some of the affected banks are unable to recapitalise and successfully go through a merger and acquisition exercise, the government may acquire shares in such banks, if they are deemed systemically important. Thereafter, government equity will be sold at the earliest possible opportunity,” the statement said.

Sanusi Lamido Sanusi, the CBN Governor, however disclosed in August that his preferred option for the first five banks rescued would be for them to be purchased by other financial institutions, foreign or local.

Nine Nigerian banks, Afribank, FinBank, Intercontinental Bank, Oceanic Bank, Union Bank, Wema, Bank PHB, Spring and Equitorial Trust Bank are currently seeking investors to shore up their capitalisation after the CBN audit exercise.