Oil Firms, Others Reappraise Banks to Deal with
Capital Base
By Ayodele Aminu
Oil majors and multinationals have started rationalizing the banks they deal with, using size of balance sheet as a major determinant. This is a follow of the Central Bank of Nigeria's (CBN's) directive that all banks in the country raise their capital from N2 billion to N25 billion before December 2005.
THISDAY recently revealed that at least one of the major oil firms is reconsidering its relationship with a medium-sized bank whose pioneer Managing Director/ Chief Executive Officer recently opted to step down.
"Honestly, majority of our deals with one of the major oil firms has been stalled because of the N25 billion capital issue. They (oil firm) did not expressly say they are no longer dealing with us but asked us to put everything on hold for the time being," a top official of the said bank told THISDAY.
The official who pleaded anonymity said he was convinced that it was not only his bank that must have been affected by this development, saying that a few other banks may have also suffered similar fate.
Besides, customers that currently deal with smaller banks have also began to reassess their relationship with a view to developing relationships with the banks they expect to still be around after the much expected consolidation.
These developments THISDAY checks reveal, is already beginning to cause a run on some banks, especially those that were given a "life boat" last year by a group of financially strong banks with the CBN standing as the guarantor of such loans.
This may have prompted some of these banks to flood the media houses with statements indicating the various options they would or about taken to meet the N25 billion new capital base a directed by the apex bank.
Foreign banks and institutions dealing with Nigerian banks have also placed on hold all their deals with Nigerian banks with a view to waiting those that would still be around after the expected consolidation in the banking industry.
Further checks by THISDAY revealed that staffers of some of these banks especially those that are not too sure of themselves are on daily basis trooping to the embassies on the pretence of going on vacation to seek for greener pastures outside the country in the face of the looming joblessness.
Mixed reactions have however continued to trail the announcement of a new capital base by CBN governor, Prof. Charles Soludo last July 6. While bankers including the Centre for the Promotion of Private Enterprise (CPPE) and the Chartered Institute of Bankers of Nigeria (CIBN) have continued to fault the new reform, other institutions like the Institute of Chartered Accountants of Nigeria (ICAN) and the Manufacturers Association of Nigeria (MAN) have endorsed it.
"MAN believes that the expand the base of the economy as more fund becomes available to support productive ventures.
"We believe the policy is well intentioned and well situated and will help to improve the nation's economy," the MAN president, Engineer Charles Ugwuh said while giving the position of the manufacturers after an Executive Council Meeting of the association last week in Lagos.
The Institute of Chartered Accountants of Nigeria (ICAN) president, Mrs. Ibironke Osiyemi had also backed the CBN, saying that if the CBN policy is well implemented, it will turn the economy of the country around.
She further stated that the N25 billion capitalisation of banks and other CBN reform initiatives, would encourage cooperation among banks, institute corporate governance and discourage one-man bank ownership.
But the bankers led by the President of the CIBN president have maintained and proposed that the N25 billion capital base be reduced to N10 billion which should be achieved in phases, that banks be stratified into three categories with each having different capital and that the December 2005 deadline be extended to allow banks enough time to source for funds.
A similar view was also expressed by the CPPE, which called on the CBN to reduce the N25 billion capital base for banks to N10 billion.
It also harped on the need for the apex bank to phase the proposed N10 billion capital base over a five-year period.
In a statement signed by its Chairman, Board of Trustees, Mr. Olu Akadiri, the Centre stressed the need for the banking watchdog to be more consultative in its approach to regulatory activities.
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