Controversy Persists Over Banking Reforms
SATURDAY, 27 JULY 2013 00:00 BY GEOFF IYATSE AND IKECHUKWU ONYEWUCHI BUSINESS SERVICES - BUSINESS NEWS
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•As Proposed Sale Of Nationalised Banks Opens ‘Old Wounds’

•AMCON Ignores Litigation, Seeks Buyers

IN a week’s time, it will be two years since the Central Bank of Nigeria (CBN) revoked the licenses of Afribank, BankPHB and Spring Bank) and the Nigeria Deposit Insurance Corporation (NDIC) had had to transfer their assets to three bridge banks. Many assurances given to support the decision may have failed. 

  But the Asset Management Company of Nigeria (AMCON), which acquired the three bridge banks—Enterprise, Keystone and Main Street— has kept its word after all. Its Managing Director, Mustapha Chike-Obi, did say the state corporation would not hold its shares in the banks for too long. 

   Should efforts to offload AMCON’s shares materialise in a week’s time, it will turn out a befitting memorial for that late afternoon’s decision the CBN described as bold and necessary on August 5, 2011. Otherwise, the general dissatisfaction among staff of the affected banks and the unrelenting cry for “justice” by the shareholders, collectively, will serve a good point for which to remember the action. 

    Indeed, the planned sale may have unsettled both management and staff of the banks even though they are not quite satisfied with the current owner’s attitude to business. 

   Investigation reveal that the staff would want the banks handed over to private investors as they do not believe that their current owner, the Asset Management Company of Nigeria (AMCON), is genuinely interested in sustaining the companies.  

    Still, the staff are scared that new owners may kick them out as soon as they take over. The fear, which was subtle some months ago, is gradually growing into palpable tension said to be seriously sapping the morale of the workforce, especially the middle and junior ones. 

  A source in the internal control department of one of the affected banks said its top management is finding it difficult to convince the “junior staff that it can protect them when the time comes. That is why those who have choices do not wait a minute to think about their exit plan.”

  As it were, across the three affected banks, the discussion is on who takes over the ownership of the nationalised banks. And on the part of AMCON, any clue to that is guarded jealously. 

  “I am not sure even the managing directors are carried along. They don’t have the slightest hint about whom the banks are going to be sold to. That exactly is the reason behind the tension in the system. It is like walking into a dark room without light. When you are in such situation, what do you do?” asked a top banker last week. 

   

Perhaps, no other era in the history of the Nigerian banking has been more turbulent than the past four years. Many top bankers have, among others, suffered stunted career growth in the period. Sources said the problem was most terrific in the nationalised banks. 

  “There are some of my colleagues who have not been promoted since 2009. Their cotemporaries in other banks have been promoted more than five times yet these guys remain where they are. Nobody will be happy in such condition. When the banks were handed over to interim management, the new handlers came with different orientations and information, which informed their approach to management. That was the problem,” noted a source.

  As a result, the period also witnessed high staff turnover. As unsatisfied staff moved from ‘rescued’ banks (before the eventual nationalisation), the interim managing directors were hiring “friends and well-wishers” from other banks to fill their spaces. In Union Bank of Nigeria Plc, it was an issue that turned into a huge media campaign. Last year, staff of Mainstreet Bank Limited protested their sack with allegations that they were simply replaced with “less qualified personnel” who were lured with better incentives. 

   Obviously, the staff desire job security. They also know that this can only come when the banks are in the hands of individuals who are generally regarded to be shrewder than the government when it comes to business management. For this reason, they would prefer having private investors as employers than amorphous government. But there is a snag. Will the new owners be willing to retain the services of the current employees?

  “It is a serious concern that is affecting both commitment and attitude to work. I have applied for a job in two more stable banks. At least half of my close colleagues have applied for jobs both in the sector and outside. An average staff of a company wants to know how useful he will be in the next few years. As soon as he discovers that his future is not safe, he opts out. That is the challenge now.   

  A prospective liability prospective buyer may be compelled to face the crisis of ownership that has rocked the banks. In fact, the renewed search for core investors was greeted by a caveat emptor signed by Chuks Nwachukwu of Pilgrims Partners.   

  In the notice, counsel to the banks called the attention of potential buyers to a lingering litigation in the Court of Appeal. The notice refers to suit no. CA/L/844/12 – Boniface Okezie & others vs. Mainstreet Bank Ltd, Keystone Bank Ltd, Enterprise Bank Ltd and others. 

   It made particular mention of section 25 of the Nigerian Investment Promotion Commission Act, which states: “No enterprise shall be nationalised or expropriated by any Government of the Federation” without the payment of compensation with the right of access to the court to determine the amount of compensation.

  “Bridge banking is not exempted from this provision as can be confirmed from section 39 (1) of the Nigerian Deposit Insurance Corporation Act which states clearly that assets of one bank being transferred to a bridge bank should be purchased by that bridge bank,” according to the notice.

      The counsel maintained that AMCON did not pay a kobo in compensation to shareholders of the banks, stressing that payments made to banks were money due to them on loans, which AMCON took over. It argued that the payments, which wiped out the bad loan portfolio of the banks, are proofs that the shareholders had no deficits in assets or capital at the time of the takeover. 

  Nwachukwu advised the public to ignore any announcement by AMCON that the banks were being offered for sale, describing the call as an act of contempt of court “that is bound to be an exercise in futility and loss of precious investment capital.”      

  The appellant, Okezie, was reported last week as saying that the shareholders would go to as far as the Supreme Court to seek redress. He argued that the blatant disregard of due process was a manifestation of the rule of might, which is becoming a norm in the country. He observed that the takeover of the banks itself was a violation of the spirit of AMCON, which was set up primarily to acquire non-performing loans (NPLs).

  Okezie, President of the Progressive Shareholders Association of Nigeria (PSAN), alleged that selfish individuals want to acquire the banks using AMCON as a front. He warned that whoever buys into the banks is gambling with his money and that local as well as international investors should stay away pending when all litigations are dispensed with.    

A Federal High Court in Lagos had dismissed a suit filed by some aggrieved shareholders of Afribank, Spring Bank and Bank PHP challenging their forceful take-over. The court, presided by Justice Charles Archibong, took the decision despite a motion by the applicants asking the judge to disqualify himself from hearing the case on the ground that he was bias.

   Archibong premised his decision on the fact that the suit was unsustainable in accordance with Section 53 of Banks and other Financial Institutions Act (BOFIA). While delivering judgment, he said: “The promoters of the plaintiff and its shareholders may have issues, but they are best directed to the National Assembly who may well decide to fine tune and/or codify in greater detail the process by which CBN exercise its powers. That is not the business of the court.”

  Not satisfied with the outcome of the matter, the plaintiff filed an appeal. The case is yet to be decided whereas AMCON, the owners of the three banks, is seeking buyers for its shares.

   When CBN and AMCON took over these three banks, they said the banks had lost all shareholders funds. This meant the toll of risk in the investment market has taken its full course, only in a drastic manner. This is the position of many investment experts, including former Chairman of the Association of Shareholders of Nigeria, ASHON, Mr. Rasheed Yusuf. 

   According to Yusuf, “Shareholders need to understand why the Central Bank intervened before they have any hope for refund, settlement or whatever it is they want to claim. The CBN intervened because they wanted to save depositors, not shareholders money. The reason for this, they said, is because the shareholders have already lost their capital in those companies. If that is the position of AMCON and CBN, then it means the shareholders have already lost every stake they have.”

   With such view, it is evident that shareholders investments in these banks have gone down the drain. Shareholders have been butted out due to inefficiencies of the former management of these banks and the trust and integrity they reposed in these financial institutions. Although this is an expected risk in the world of shares, what then is the assurance that these banks are financially stable to shoulder the financial responsibilities, trust and goodwill to do business in future?

   To this, Yusuf said the fact that depositors at these banks have been transacting business for sometime with no hassles is a good enough sign of better days to come. He said for AMCON to come up with the advertisement for sale tells that the banks are ready to be taken over by private hands.

   However, he opined that to compensate affected customers, the banks, when next they issue their shares, should give preferential treatment to these people by offering them special allocation. He said this would in the long run prove that they are humane and regret the initial loss.

  Also, Bode Ashogbon said the shareholders are presumed to have lost their investment at the legacy banks as their licensees have been revoked. He said they have no claim in the bridged banks since they are new organisations, especially since the value of previous shareholding has been eroded.

 Yet, the argument continues as some stakeholders query the apex bank’s intervention and bailout of  ‘weak’ banks, three of which were eventually nationalised.

   “If Sanusi, indeed used public funds to bail out the banks, as alleged, why were the shares not held by Federal Ministry of Finance incorporated as is the usual practice?, a source, who is  familiar with the process queried. 

   He continued: “Were the manipulations and macabre dance by the CBN a ploy to transfer the Banks into preferred preplanned private hands? 

 •Why were the shares not sold on the Stock Exchange to Nigerians who are the owners of the public funds allegedly used to bail out the banks?

• Why were the banks sold to single bidders rather than encourage competition?

• Why did the seller (CBN) supervise and approve valuation and also choose the buyer? Was this a ploy to rob shareholders of their investment?

• Why were the shareholders given only 3½ percent of their initial holdings after the takeover?

• was it fair to herd the directors into AGMs to approve the sale of their banks while at the same time facing various criminal charges in court instituted by the same CBN? Were these AGMs voluntary or arranged by CBN?

• Did Access Bank second its staff to SEC prior to approaching the Commission for approval for the sale of Intercontinental Bank?

• Was this seconding preparatory to approaching SEC for approval of the purchase and change of ownership of Intercontinental Bank?  

• Would an independent SEC have approved these transactions?

    Prospective owners may also have labour issues to contend with. Ex-workers in one dispute or the other have engaged virtually all the banks in the past one year. For instance, Mainstreet had a raw deal with different categories of staff totaling 700 who claimed to have been disengaged under controversial circumstance without appropriate settlement. 

Source-The Guardian