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 Daily Independent Online.
* Friday, August 13, 2004.
N25b Capital
Base
Senate set to over-rule CBN
• Divides banks into mega,
medium and small categories
• Raises CBN capital base to
N60 billion
• Inter-bank rate crashes as
apex bank withdraws N8bBy Adetutu Folasade-Koyi (Abuja) and Esan Sunday
(Lagos)
Lawmakers and the Central Bank
of Nigeria (CBN) seem set on a collision course as the Senate has begun
moves to amend the CBN Act, Decree No 41 of 1999, and the Banks and Other
Financial Institutions Act (BOFIA), Decree No 40 of 1999.
Both are major instruments of
regulating the money market.
Contrary to CBN Governor
Charles Soludo’s insistence that all banks will have a minimum N25
billion capital base, the Senate is recommending that only mega banks
should be given that option.
The development in the Senate
coincided with the crash in inter-bank rate following the withdrawal of
N8bn from the system by the apex bank.
On Thursday, the First Reading
for an amendment of both Acts was made on the floor of the Senate,
chaired by Senate President Adolphus Wabara.
Second Reading would be done
next Tuesday after which it would be referred to the Senate Committee on
Banking, Insurance and Financial Institutions.
A major amendment of the CBN
Act raises its paid-up capital to N60 billion while banks would be
categorised into mega, medium and small banks, based on their financial
capabilities. In the present
CBN Act, its share capital is N300 million.
An amended Section 9 (1) of
the BOFIA reads: “Amendment to Section 9 (1): Amend Section 9 (1) to read
thus: Banks should be categorised according to paid-up share capital.
There shall be three categories as follows: (a) Mega banks with minimum
share capital of N25 billion; (b) Medium banks with minimum paid-up share
capital of N10 billion; and (c) Small banks with minimum paid-up share
capital of N5 billion”.
The BOFIA has 41 major
amendments, the CBN Act has 10 in two separate bills sponsored by
Senators Zik Sunday Ambuno, Farouk Bello-Bunza and Isaiah Balat.
Ambuno chairs the Senate
Committee on Banking, Insurance and Financial Institutions, Bello-Bunza
is his Deputy. Balat, who is the Chairman, Senate Committee on Privatisation,
is also a member of the committee.
A major amendment of the CBN
Act in Section 4 (1) reads: “Amendment to section 4: Amend 4(1) to read
thus: the authorised capital of the bank shall be sixty billion naira.
4(2) remains the same. Amend 4 (3) to read thus: The paid-up capital may
be increased by such amount as the board may, from time to time, resolve
with the approval of the National Assembly, and shall be subscribed by
the Federal Government and paid-up at par”.
In addition, an amended
Section 9 (1) stipulates that the appointment of CBN governor and deputy governors
shall be subject to confirmation of the National Assembly.
“Amendment to Section 9: Amend
section 9 (1) to read thus: The governor and deputy governors shall be
persons of recognised financial experience and shall be appointed by the
President subject to confirmation by the Senate by instrument under the
public seal and on such terms and conditions as may be set out in their
respective letters of appointment”.
Section 9 (3) is amended thus:
“In selecting the governor and deputy governors, the President shall have
due regard for a fair representation of the financial, agricultural,
industrial, and commercial interests and geographical spread of the
country”.
An amended Section 9 (3) will
negate President Olusegun Obasanjo’s appointment of the present governor
who is an economist.
Also on Thursday, in a move
that confirms that all is not well in the banking industry, the
inter-bank market rate crashed again with the 30 days Nigerian inter-bank
offered rate (NIBOR) rising to 20.4 per cent.
It happened just as the CBN
said it has only withdrawn N8 billion from the N74.5 billion that would
be ultimately withdrawn in the first phase. Consequently, most banks have
placed an embargo on all facilities until further notice to enable them
have enough money to honour customer demand.
The big banks have started
recalling their funds from the inter-bank market and this has further compounded
the problem of medium and small banks as over 45 per cent of banks depend
on inter-banks funds for survival.
CBN spokesman Tony Ede told
newsmen on Thursday that contrary to reports that the bank has withdrawn
N74.5 billion, it had only withdrawn N8 billion through one of the four
parastatals mandated by it.
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