N25bn Capital May Affect Foreign Banks
Bank chiefs appeal to customers
By Amarachuckwu Ona, Crusoe Osagie and Akpan Uyinme
Foreign banks operating in Nigeria are expected to comply with the recent directive of the Central Banks of Nigeria (CBN) that all banks should increase their capital base to N25 billion by December 2005.
The foreign banks which are said to be seeking exemption from the CBN directive include Citibank (Nigeria International Bank) which is 75 per cent owned by Citibank Overseas Inc.; Ecobank Nigeria, 54 per cent owned by Ecobank Transnational Inc.; NBM Bank, 50.13 per cent owned by Belgolaise South Africa; and Habib Bank Nigeria Ltd, 40 per cent owned by Habib Bank International, Pakistan.
Others are Standard Chartered Bank with the parent company in the United States, Stanbic Bank (South Africa) and Indo Nigeria Bank (India).
Sources close to the CBN told THISDAY that the foreign banks are complaining that since they have their parent banks located outside the country where different laws on deposit operate, they should not be subjected to the new CBN policy.
However, CBN is said to have noted that when Nigerian investors establish businesses abroad, they comply with the local laws and regulation and that the same situation should obtain in the country.
"We won't exempt any bank operating here in the country. Their operating license represent their readiness and willingness to subject themselves to the operating laws and policies in the nation's banking sector," the CBN source said.
However, appealing to bank customers not to make panic withdrawals, yesterday in Lagos, bank chiefs under the aegis of the Chartered Institute of Bankers of Nigeria (CIBN) said shortly after the "First Bank Chief Executives' Forum", that there is no cause to worry over the health of banks.
The President, CIBN, Mr. Samuel Kolawole, who led a team of three other top bankers, including the Managing Director, Marina Bank, Dr. Jaiye Oyedotun, the CIBN Registrar, Mr. Esan Ogunleye, and one of the directors in CIBN, Mr. Uju Ogubunka, assured that no customer of any bank will suffer any loss.
"What we are interested in, is to let the banking publics know that having to comply with the N25 billion directive, or going through the process of mergers and acquisitions, does not and will not necessarily result into any loss on the deposit of customers of any bank", he said.
Kolawole noted that the managing directors/chief executive officers of banks have set up a 10-man committee to deliberate on the directive and come up with whatever the banks we agree to work with.
According to him, "whatever happens, there is no need for the banking publics to panic and run helter-skelter moving money from bank A to bank B."
"We are still at the formation stage, which requires inputs from every stakeholder to assist and guide the regulatory body in forming the final policy", he added.
Earlier, the Managing Director/Chief Executive Officer, Gulf Bank of Nigeria Plc, Mr. Babajide Rogers, told THISDAY that there is still room for dialogue and suggestions regarding the situation.
Rogers listed the three things that are bound to happen to include, either the banks remained at status quo, which he said is not likely, or comply with the directive by December 2005, or there may be some kind of amendment to the amount or the date.
On whether the directive can cause a run on banks, Rogers said that it would add flavour and different structure to the banking industry.
According to him, there are likely going to be mergers and acquisitions, and strategic alliance, which would ensure consolidation, strengthen banks and boost the industry's credibility.
"Like in other developed countries, there are still smaller banks that do different kinds of business and that is my appeal in this situation, let us dialogue so that we know exactly how we would shape the industry from now", Rogers added.
But in rejecting the CBN directive, NLC President Comrade Adams Oshiomhole, said that the policy would send mixed signals to the banking public, resulting in panic withdrawal and unnecessary pressure on the banking sector.
The situation, he said, could lead to banks' failure, punctuate the progress of the real sector and increase the already complicated unemployment problem.
Oshiomhole who spoke yesterday during the Annual General Meeting (AGM) of the Manufacturers Association of Nigeria (MAN) in Lagos said: "It is unfortunate that in this era when the government is making a case for deregulation and enthroning market forces, it would turn around and contradict itself."
"Yesterday (Tuesday) I read in the papers about the N25 billion new capital base for banks and it would appear that the government no longer trust the market, they no longer trust deregulation and they would rather use administrative fiat to compel banks into mergers and acquisition.
"If the government sponsors this kind of speculation and you and I who are worried move from bank to bank to withdraw our money from banks we are not sure will make it, a lot of confusion is generated in the sector, a lot of banks will go under, more workers will be retrenched and this may lead to the collapse of the entire financial sector," he said.
Speaking on the theme of the MAN AGM 'Combating Fake and Counterfeit Products', Oshiomhole said the Customs Department were the biggest culprits in smuggling, faking and counterfeiting. He added that the custom has been a clog in the government's reform process.
"The customs has remained a weakling in the governments reform policy process. If you want to use tariff to balance the competition between local and imported products, then the success of the tariff system depends on the effectiveness or otherwise of the customs. If you prohibit importation and the customs allow the goods to come in, then the policy will not work, he said.
"The evidence we have is that we have a couple of hundreds of Turks around the border towns in Nigeria and over the past few weeks many of these Turks have been allowed to come into the country and they have depressed further the market of local products. I think the customs should be charged with the responsibility that once the date expires on a prohibited item and it is still found any where the head of the customs should be asked to resign," he added.
Also speaking during the event, the MAN president, Engineer Charles Ugwuh, called for a concerted effort from the government and the private sector to fight the problem of faking and counterfeiting which has become an international multi-billion Dollar crime.
According to him, the losses incurred by legitimate businesses as a result of the activities of fake product manufacturers runs above $200 billion annually.
"In reality, the problem of fake and counterfeiting is an international, multi-billion Dollar crime dominated by organised syndicates and legitimate businesses across the globe. Nigeria now loses about N200 billion in revenue each year due to the prevalence of fake and counterfeit products," he said.
He said an estimated 10 and 30 percent of cosmetics, toiletries and packaged foods; 20 to 30 percent of electronic goods and computer peripherals as well as 40 to 50 percent of engineering and automobile parts presently in the Nigerian market are counterfeit.
"At domestic levels especially in the textile and garment sector, smuggled goods control about 73 percent of the market, little wonder the sector was forced to reduce its workforce from 170,000 to 57,000 by the end of October 2003" he said.
Minister of Commerce, Ambassador Idris Waziri, who gave the keynote address at the ceremony charged all stake holders in the economy to join forces in the battle against smuggling as well as fake and counterfeit products. He stated that such products cannot get into the country without insiders co-operating.
"I hold Nigerians responsible for the menace of fake and counterfeit products that are smuggled into the country because the foreigners who perpetuate the act cannot get these products into the country without the connivance of Nigerians," he said.
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