SEC Set for Mergers, Acquisitions of Banks, By DG
From Kunle Aderinokun in Abuja
The Securities and Exchan-ge Commission (SEC) has said it is ready for heavy traffic of activities that would be instigated by banks' quest for re-capitalisation to N25 billion as directed by the Central Bank of Nigeria (CBN).
The CBN last month directed banks to increase their capital base from N2 billion to N25 billion effective from December 2005. Banks unable to meet the deadline are advised to go into mergers and acquisitions.
Already, the SEC has advertised in national dailies in anticipation of "increasing number of applications with provisions in the offer documents to utilize excess monies to the extent that their authorized share capital could accommodate."
Expressing the Commission's preparedness in an exclusive interview with THISDAY, Director-General SEC, Mallam Suleyman Ndanusa, said "what we have done is that we have enhanced certain positions in the mergers and I just did a re-organization to prepare ground for the flurry of activities that will come in there."
He added, "We also have a task force right now to help the department in case there are too many applications for mergers and acquisitions in that area." He noted that the investing public has been informed by the Commission how prepared it is to begin to handle their applications.
"We are not new to some of these sudden flow of activities in a particular sector. You will recall when BPE was very active, I mean for SEC, we guaranteed them 48 hours of approval, and the same task force and department is still intact," he said.
Ndanusa said SEC welcomes the new directive, because "we believe that for Nigerian banking sector to be competitive, the level of capitalisation will have to be increased." But he added that "whether or not it should be N25 billion, whether or not we have enough notice for that is another matter, but of course the direction is clear, that one day one day, we will have to move from N2 billion to a more robust capital structure."
He said that there was a need to create more choice for the banking community.
According to him, "already, we have community banks, maybe we should have regional banks, maybe we should have state banks, because in the US, you have state banks, you have regional banks...an entrepreneur that wants to be in banking can remain in community bank, if they say a state bank or regional bank is N10 billion, then there are so many private banks that will rather remain at the state or regional bank and then N25 billion will be for national banks.
"We should not kill entrepreneurship, because an individual that has started any business in the banking sector should not be forced to lose out by way of take over or maybe he doesn't want to merge. There are many Nigerians who will not want to open up their businesses, but they are employing people.
These people were there when we needed entrepreneurship, and therefore we should encourage them, especially with government's current focus on SMEs."
According to him: "I feel that if our private banks cannot afford N25 billion, but can afford let's say N10 billion, then CBN should give different licenses, say regional bank or a state bank. But you cannot operate outside that particular zone, for example if you have a regional bank like a north-west or south-west bank and you give them the license, they will only operate within that zone. What that means is that regional banks do not have anything to do with foreign exchange, they can refer anybody that wants to deal in foreign exchange to the national bank."
Noting that all other banks should have their correspondent banks to be national banks, Ndanusa said, "If you want to do anything across the border, you have to go through the UBA, First Bank and so on that have met the minimum requirement. When you do that, you have different baskets in the market place, you have people who are community bankers, take care of trade, local craft, industries and so on, to develop entrepreneurship and fund it because now banks will be forced to fund their community. If you have a community bank, it cannot go and fund in Abuja.
He pointed out that by this, banks would be forced to "look at their immediate environment not foreign exchange."
For instance, he said, "If you have a trade bank or a regional bank, banks are forced to look at the possibility around that place, if the possibilities around a state like Niger is agric and solid minerals, they cannot go and fund petroleum..."
Ndanusa said while the Commission agrees with the increase in principle, "I hope that Central Bank creates an opportunity so that there would be a room for private banks to operate with limitations."
"You can be a state bank today, after five years you would have grown to a regional bank. There should be more windows, opportunities for private entrepreneurs to come in because you need them," he said.
However, he said the SEC was not adequately positioned to police the capital market, pointing to lack of funding as its bane.
According to him, "government does not need to fund us forever, just give us a grant, don't even give us, we will tell you things to get for us, get us a right software so that we can regulate multiple exchange, commodity exchange, (how can we regulate commodity exchange when we don't even have the capacity of fully regulating a stock exchange on real time basis).
I am supposed to be working on-line, knowing what is happening through satellite communications etc, we are not there yet because we are doing these things manually."
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