He assured however, that the Federal Government had no intention of taking over the affected banks, in spite of the N400 billion injected into them , as according to him, the intention was only to strengthen the banks. Government funds being injected into the banks, he explained, would be converted to a type of preference shares.

"We have no plans of nationalizing any bank. T[b]he plan is towards conversion of the liquidity into equity in the forms of preference shares[/b]. The intention is to look for investors to acquire them and we get out as quickly as possible because I do not believe that government is a better manager than the private sector. No. the liquidity is just to deliver support."

@Ibime
From the link you posted , the following comments I have highlighted do not only confuse you as you had admitted, it confuses me and most other people. But these are my areas of confusion.

1. that the Federal Government had no intention of taking over the affected banks, in spite of the N400 billion injected into them.
    You close the EDW and then you come up with this. Liquidity support like Adenuga did with ETB is a loan support. Aquisition like the British or US covernment did with RBS and Citigroup is part Nationalisation where the government bails out a bank and the funds are converted to shares and the government then own these shares thereby having a stake in the bank and hence wielding deserved executive powers.
From Sanusi's comments, he's neither here nor there. It is either he is not really saying what he is up to or he doesn't know what he is up to.
He is towing a middle ground that explains nothing, a vacuum.

2. would be converted to a type of preference shares. I guess the begging question is "What are they now?"

3. The new management of the bank if you remember had said that they never required anywhere near the amount pumped into the bank. http://www.vanguardngr.com/2009/09/10/5-banks-use-only-n100bn-of-cbns-n420bn/.
As a matter of fact they needed only 100 billion put together.
If you add that with the fact that EFCC have recovered some of the money and the government have accepted (guaranteed) responsibility of some of the others, together with the fact that there is an ongoing global financial crisis.
You must then come to the conclusion that the banks needed little or no bailout .
In luei of this you will also come to the conclusion that sanusi used insolvency as an excuse to wield a wider control in the banks.

4.  The intention is to look for investors to acquire them and we get out as quickly as possible because I do not believe that government is a better manager than the private sector.
What a contradiction.
You forcefully pump money into a bank as support.
Unillaterally convert them to preference shares (eventually) and then sell the shares to an investor of you choice and you say you are not managing the bank.
With this precedence, what it is the assurance that this will not happen in the future because the only intention I can see is forcing an investor of his choice on the bank.

I am not one of those that will want to discredit Sanusi for "being a Notherner" (whatever that means) or alleging that he has a hidden agenda but I will not blame those who do.
If you are busy carrying out sweeping but illogical and potentially destructive actions without properly explaining yourself then you start looking suspicious.

Ibime:

(1.) Your position is  that you can't buy a company worth N1 or 2 trillion with N100billion? Who told you UBN is worth N1trn or N2trn? At some stage, it will be wise to just admit that you dont have a clue what you're talking about. The assets for 2007 stand at N700bn. The liabilities stand at N600bn. You say that by the next year the assets had grown to N2trn? Really? From $700bn? Even if I agree that is the case, only an ignoramus will tell me the bank is worth $2trn without even looking at liabilities. Since when is the value of a company determined by its gross asset value?


Anyway, thats by the by. . . .


(2.) Our debate was whether CBN's $100bn investment would make them majority shareholder. A sciolist like yourself disagrees based on the gross asset value of the bank. It is at this point that we really see what calibre of person we are discussing with. Even a novice knows that the first thing to do in such a scenario would be to look at the market cap and see what percentage holding a N100bn investment will give an investor. The bank is only worth it's market cap, which for UBN is N70bn - 90bn, and CBN's N100bn investment easily takes it across the 51% threshold which would allow it to be considered the majority shareholder.

(3.) I believe the loans have been converted to preference shares.

This is not necessary true. If it is known that the intrinsic value of the stock is far higher than the market value, then the stock is grossly undervalued. The likely price of exchange is this case will be closer to the intrinsic value. The situation here is not a straightforward buying of shares on the trading floor, so the injection of 100bn does not really transcend to majority shareholding as you simply inferred. Who evaluated that UBN needed 100bn injected by CBN? Even if you decide to follow the simple logic of market cap; on which day's market cap should the voting rights allocation be based? Todays' as you postulated above or on the days leading and up to the intervention day?

Meanwhile most of the banks have lost more deposits than the amount injected by CBN in the last few months. I think it is fair to say that the greatest difficulty for CBN will be in selling some of the banks because the issue of valuation will arise in the courts. The most appropriate course of action will be for the banks to recapitalize and CBN should go ahead and blacklist anyone found guilty in the court from holding any position in the management or board of those banks.

The loans were provided as Tier II convertible debt (and preferential stock is a example).

@Ibime by reading your write-ups and your line of reasoning, I am beginning to understand Sanusi better.
Both of you need to be more informed.

@ CoolG

Save scientific details for later. Lets not get too technical, especially with people who look at GAV to value a company.  . Im just giving Naijaking the quickest way to have an idea of the value of the holding without too much calculation.


@ adigun,

It was always said that the loans were convertible loan stock which can be turned to equity subject to certain agreements. Sanusi said he has no intention of taking over the banks, but if they default on the debt, he has to provide taxpayers with an insurance, which is converting the debt to stock. It would be foolish of him to expose taxpayers to risk of default without providing a get-out.

Ibime:

@ adigun,
It was always said that the loans were convertible loan stock which can be turned to equity subject to certain agreements.

What do you mean loan stock converted to equity under certain agreements. Like sanusi you are using financial terms carelessly without making any sense.
What are the agreements with whom were the agreement signed , sanusi's executives ?
Since when did a lender of a loan security have to determine how much the borrower needs and then lends the money only for the lender to determine the terms of the loan at a later time.
This is exactly what some people have christened Sanusi Banking because it contravenes all coporate and financial practices.
Doesn't all this smirk of irregularities to you?
At the moment the market does not determine the value of the banks neither do the share holder determine the direction of the banks Sanusi is practically doing all of these.
He is eveluating the banks. He is determining the level of support needed, he is selecting the executives of the banks and he is stiring the direction of the banks by trying to create prefernce shares it will sell to any investor of its choosing.

Sanusi said he has no intention of taking over the banks, but if they default on the debt, he has to provide taxpayers with an insurance, which is converting the debt to stock. It would be foolish of him to expose taxpayers to risk of default without providing a get-out.

Under what terms can they be deemed to have defaulted . What are the terms of repayment.
By the day this man is giving me the impression that he does not have a clue what he is doing.

@ adigun,

By your arguments, perhaps its better for Sanusi to just let the banks run into problems whilst maintaining the facade that everything is OK on the books. CBN as regulator have the right to step in and conduct tests on these banks at anytime and inject capital, just like they conducted stress tests in Yankee. Left to the CEO's of the banks, we will still be hearing that everything is rosy, until the bottom drops out. Do you think loans from the feds to the Yankee banks were not in the form of convertible securities same as CBN's?

All these talks about irregularities. . . . do you think there are not many courts to decide that? Remember the senators that where yarning opata until Sanusi disgraced them in the Senate steering committee, exposing their lack of legal knowledge. Talking about illegality is mere speculation unless you can produce the article contravened, so be careful when yarning legal talks if you are not a legal expert.

Im done arguing nonsense. Have a nice day.

Ibime:

@ adigun,

By your arguments, perhaps its better for Sanusi to just let the banks run into problems whilst maintaining the facade that everything is OK on the books. CBN as regulator have the right to step in and conduct tests on these banks at anytime and inject capital, just like they conducted stress tests in Yankee. Left to the CEO's of the banks, we will still be hearing that everything is rosy, until the bottom drops out. Do you think loans from the feds to the Yankee banks were not in the form of convertible securities same as CBN's?

All these talks about irregularities. . . .  do you think there are not many courts to decide that? Remember the senators that where yarning opata until Sanusi disgraced them in the Senate steering committee, exposing their lack of legal knowledge. Talking about illegality is mere speculation unless you can produce the article contravened, so be careful when yarning legal talks if you are not a legal expert.

Im done arguing nonsense. Have a nice day.

Well you are right in the fact that we are arguing nonsense. Neither you nor I understand Sanusi and I reserve the right to ask questions even if you wont. The fact that you have drawn comparison with yankee banks without seeing the huge differences even though I have spent a while trying to point them out shows the gulf in detailed knowledge. I cannot even start to point out the irregularities but it is quite appalling that you cant see them.
I have seen people celebrate military coups in Nigeria which were conducted using all manner of excuses so this one doesn't surprise me.
Enjoy the new era of banking in Nigeria!

Just a follow-up:

[size=18pt]Nigerians In Diaspora Want Review Of Banking Reforms [/size]
Written by Golu Timothy, Abuja
Monday, 02 November 2009 20:45

Nigerians in the Diaspora have called for a Presidential review of the banking reform as designed and implemented by the Central Bank of Nigeria (CBN) Governor, Mr. Sanusi Lamido Sanusi, so that the banks do not experience any form of distress again after the latter leaves office.

While commending his initiatives, the group, the Nigeria Circle, said that Sanusi needs to be put under close check and scrutiny to ensure that he does not become another Charles Soludo in time to come, and that some of the banks should be returned to their owners.

In an open letter to President Umaru Musa Yar'Adua yesterday, the group alleged that, “Sanusi is beginning to drift and is increasingly loosing focus as to his role as the CBN governor and the role of the CBN in nurturing an undeveloped economy like Nigeria's. “

“He is solely fixated with finding new owners for the banks he has approximated to himself.

The propriety of Mr. Sanusi's action in taking over the banks is still a matter of litigation in the courts, yet Mr. Sanusi has gone to pronounce death sentence by firing squad on Nigerian owners of the banks”.

In the statement signed by the group's president and Secretary,Mr. Michael Adetunji and Uche Nwokobia, respectively, the group questioned the wielding of the big stick on eight banks, their CEO's and management, saying there are ample evidence to warrant a scrutiny of Mr. Sanusi's actions and pronouncement since the action.

"Recall, Sir, that in the hey days of banking consolidation carried out during the Obasanjo's era, President Obasanjo's feeling happy and satisfied at the brilliance and ingenuity of Professor Soludo was ascribed to Professor Soludo as the source of all he knows about running the Nigerian economy. Today, Nigerians are wiser to the resultant effect of the acclaimed depth of knowledge of Professor Soludo and the impact it had on our economy.

Today, your administration is busy correcting the economic mistakes of your predecessor.”

They said Nigeria cannot be immune from the world's economy either in good times or in periods of meltdown.

"Professor Soludo made you and Nigerians believe that our economy is insulated from the global economic meltdown. If you have not had the benefit of a knowledgeable team of economic advisers, you would have fallen into the same trap President Obasanjo fell into with Professor Soludo's unintelligent advice and theories.

Hence it can be safely said that the quality of leadership at the CBN is circumspect and their actions must be analysed and re-analysed before being taken as a policy to be implemented by government.

Most of us thought as Mr. Sanusi wanted us to believe that the banks would not be able to meet their obligations the next day of business, but events since then have shown that Mr. Sanusi's position was alarmist, uncalled for, vindictive and an encroachment on the fundamental rights of Nigerian entrepreneurs to do business in their country.

Is it a crime to do business in Nigeria? Entrepreneurs' are now scared of doing business in Nigeria because Mr. Sanusi has impinged up the sacred and confidential relationship bankers have with their customers.

So how will the banks now serve as a catalyst to the attainment of your 7 point agenda and the vision 2020?

I dont understand dis beef against Sanusi. He may have overstepped his boundary by trying to peep into the market value of this banks but actually I dont see why a regulator cant. Adigum101, wots wot you aint telling us cos all your posts are like you are after this guy. As said earlier, u will still come here expressing regret after the CEOs trial. You said that the banks were on the verge of recovery when Sanusi interfered and I wanna ask how long the recovery process would have lasted as if you are forgetting its the CBN's duty to protect the minority investors from the monsterous acts of the CEOs and their likes.
Lets all wait for the court's verdict.

I dont understand dis beef against Sanusi. He may have overstepped his boundary by trying to peep into the market value of this banks but actually I dont see why a regulator cant. Adigum101, wots wot you aint telling us cos all your posts are like you are after this guy. As said earlier, u will still come here expressing regret after the CEOs trial. You said that the banks were on the verge of recovery when Sanusi interfered and I wanna ask how long the recovery process would have lasted as if you are forgetting its the CBN's duty to protect the minority investors from the monsterous acts of the CEOs and their likes.
Lets all wait for the court's verdict.

adigun101:

The fact that you have drawn comparison with yankee banks without seeing the huge differences even though I have spent a while trying to point them out shows the gulf in detailed knowledge.

Could you provide a list of differences in the Yankee approach and the CBN approach. I cant be bothered to go through your old posts. If you can surmise them, I will be glad to pick through it. As regards firing of CEO's, I would like you to remember that FRAUD is suspected, so keep that in mind when drawing up your list. In that respect, I will like you to draw comparison with Yankees approach to Enron.

Lemme see the difference in approach.

Ibime:

Could you provide a list of differences in the Yankee approach and the CBN approach. I cant be bothered to go through your old posts. If you can surmise them, I will be glad to pick through it. As regards firing of CEO's, I would like you to remember that FRAUD is suspected, so keep that in mind when drawing up your list. In that respect, I will like you to draw comparison with Yankees approach to Enron.
Lemme see the difference in approach.

The enron example is bad. Giving out loans without collateral(the most quoted misdeed of the CEOS) is not fraud, but bad management initiative-----we've gone through this a trillion times already. Can we wait for the courts to conclude their investigations?
In the US, troubled banks asked for and recieved goverment assistance, in Nigeria, Sanusi, and Sanusi alone decided who needed, and who must recieved goverment assistance without giving the banks any sort of opportunity to correct any percieved shortcomings.
Don't forget some US bank refused goverment bailout. Tell me which Nigeria bank had an opportunity to accept or refuse Sanusi's intervention.

naijaking1:

In the US, troubled banks asked for and recieved goverment assistance, in Nigeria, Sanusi, and Sanusi alone decided who needed, and who must recieved goverment assistance without giving the banks any sort of opportunity to correct any percieved shortcomings.

A regulator has right to step in anywhere there is contagion risk.

Google "Tim Geithner stress test" before yarning opaks.

A simple quote you might find if you google that:

"All banking institutions with assets in excess of $100 billion will be required to participate in a coordinated supervisory review and comprehensive stress test."

Im sure it skipped your attention that Europe's 30 biggest insurers are subject to a compulsory stress test as well. . .

http://www.reuters.com/article/governmentFilingsNews/idUSWEA344820090519


In all these scenarios, these companies were capitalised with convertible securities. . . . Im struggling to see the difference between that and CBN's action. . . . can you remind me again in plain English?

naijaking1:

Giving out loans without collateral(the most quoted misdeed of the CEOS) is not fraud, but bad management initiative-----we've gone through this a trillion times already. Can we wait for the courts to conclude their investigations?

I always leave myself room for error, hence the use of the word suspected fraud.

Of course the stories of lending money to nannies, lending money to themselves (through companies in their name) and renting properties from themselves (on behalf of the bank) at exhorbitant prices does not constitute suspected fraud.

@Ibime
Again, your comparison lacks merit. Tim Geithner is the treasury secratary of our equivalent of finance minister. Berneke of the Federal reserve bank is more of what Sanusi is to Nigeria.
Anyway, there is no question about making financial institutions pass a stress test. The problem was that Sanusi did not have time to take these banks through standard stress test, instead he jumped in head-first, then began to ask questions and make up reasons for jumping in later.
Don't even try to fool anybody, we're not questioning the need to do stress tests here.

What follows stress test. . . . no be capital injection?

Please speak English for me again. . . .

You were just saying that CBN should not be conducting stress test (capital adequacy test) and injecting funds without the acquiesence of the banks. I've just showed you example of it happening in Yankee and Europe. Now you are yarning another story. Talking about Tim Geithner is poppycocks cos the office of the Tres Sec happen to have the regulatory power to perform that role in Yankee whilst CBN has similar regulatory power in Naija. Now you are saying that CBN did not do any test on the 5 banks before taking action when a capital adequacy test was conducted on all 5 with the findings below:

http://www.chairmanking.com/why-bank-ceos-fired-lamido-sanusi-20090815/


Save story for another day abeg.

No CBN governor has appeared in public functions more than this Alariwo Sanusi. All over the world CBN governors talk less but in Nigeria we have Ali Baba as governor who grants interviews at every opportunity. Every week now banks are retrenching and more families are being thrown into deep poverty. someone needs to call dis mallam to order.

Ciamon,
Even Wole Soyinka wrote a song about it before I was born,

https://www.youtube.com/watch?v=a73wSaXE3VM
Tunji Oyelana & His Benders - I Love My Country / Chairman