Central Bank of Nigeria
(CBN) governor, Pro
fessor Charles Soludo, yesterday in Lagos, rolled out guidelines for mergers and acquisitions by banks in line with the new policy aimed at jerking up their paid up share capital to N25 billion.
Briefing journalists on the guidelines and CBN’s plans to help banks that would be likely to achieve the minimum capital base requirement of N25 billion, Professor Soludo unveiled a set of incentives that would enhance the consolidation of the Nigerian banking industry in line with ongoing reforms in the financial sector.
Flanked by his deputies, Dr Shamsudeen Usman and Mr Tunde Lemo, at the briefing in Lagos yesterday, the apex bank boss reiterated that there was no going back on the N25 billion capital base requirement expected to be met by end of December next year.
Professor Soludo, however, disclosed that the Central Bank of Nigeria would not only bear the cost of such mergers and acquisitions by banks that opt for such, but those that meet the targeted N25 billion minimum capital base requirement within the stipulated deadline have the prospect of managing part of Nigeria’s over $10 billion foreign reserves.
He disclosed that the CBN planned tax incentives, reduction in costs of transactions, payment for a team of experts to provide technical assistance to banks effective from August 15, 2004 to en-sure that consolidating banks do not bear undue costs as a result of the new policy.
Soludo also disclosed that the apex bank planned a CBN governor’s distinguished industry leadership award to banks on the basis of the speed of completion of the consolidation, succe-ssful acquisition of marginal and unsound banks, the number of banks involved in each consolidated group.
He explained that matters regarding tax reduction and other waivers would be done with the cooperation of the Securities and Exchange Commission (SEC), the Nige-rian Stock Exchange, the Corporate Affairs Comm-ission, financial advisers, solicitors to the scheme, stoc-kbrokers, and others, adding however, that the CBN will provide a help desk to fast-track approvals.
“The CBN will negotiate the possible write-down of its exposure to the distressed banks that would be acquired as a way of improving their balance sheets as well as the treatment of distressed banks’ bad assets. The nego-tiations will also address the interests of the current own-ers of the distressed banks in the new arrangement,” he said.
“The CBN will encourage and facilitate the setting up of an assets management co-mpany (AMC) in collabo-ration with other relevant agencies,” he said, adding that the CBN’s determination to ensure that the mergers and acquisitions were expected to be done in the most legal and transparent manner, it would ensure that the interests of depositors and other stakeholders are protected.
However, he emphasised that “the only legal modes of
consolidation allowed are mergers and outright acquisi-tions/takeovers. A mere group arrangement is not acceptable for the purpose of meeting the N25 billion. Therefore, all banks that have other banks as subsidiaries or have common ownership are encouraged to merge,” he added.
He urged Nigerians to think more of the overall economy rather than be paro-chial in their thoughts about the N25 billion capital base for banks, saying that if some of the banks that were unsound close abruptly, it could harm the economy.
He said with the ongoing programme, a good number of the banks on the brink could be saved, and the thousands of jobs that would have gone with them, and that the economy would gain tremendously if the nation were able to create a stronger financial system, as the productive sector could be better served.
