Omoh Gabriel, Business Editor
The Central Bank of Nigeria has voided about N50billion worth of shares of banks in the ongoing consolidation exercise. Investigation revealed that the apex bank in its capital verification of banks that have issued IPO or Public offer so far as well as those offering private placement have cancelled application for shares worth N50 billion. Authoritative sources said the CBN has voided allotments already made by GTB, ZENITH and OCEANIC bank estimated at over N24 billion.
Investigation revealed that Access bank and Afribank have about N15billion of their share application by investors cancelled by the CBN. Investigation show that 44 applications for 716,929,500 shares of Access Bank were cancelled by the CBN amounting to N2.07 billion. Afribank on its part had a total of 53,486 applications for 4.5billion sharesin its public offer. Of this 6,211 applications for 2,033,243,200 were cancelled out by the CBN amounting to N13.8billion. Other banks involved in private placement have been also affected by the capital verification exercise in which some of the subscription for shares made by investors amounting to N15 billion were rejected by the CBN. Those of Zenith, GTB and Oceanic Banks because they have been allotted, before the CBN action, the exact figures could not be ascertain as the CBN simply said that they have been directed to return some money for rejected applications to the affected investors.
Confirming the story the CBN Deputy Director Corporate Affairs, Mr. Tony Ede said that the CBN has asked Zenith and Oceanic Bank to return some money to those investors who had earlier subscribed to their Initial Public Offer and by the CBN capital verification has been rejected. By this action most banks which have shareholders fund far above the N25billion minimum will now have to adjust their capital to give room to the rejected funds..
Giving reasons for the rejection, Mr. Ede said that those who applied for bank shares through borrowing from the banks were affected as well as those suspected to have used funds believed to emanate from money launder and funds from questionable sources. He said that substantial amount of dollar denominated subscriptions to bank shares were rejected by the CBN thus confirming fears in the banking circles that all substantial dollar denominated investment made from abroad were rejected by the apex bank. At the Nigeria Economic Summit Group meeting in 2003, a professor of Economics at Oxford University told participant that over $107 billion of genuine Nigeria money is stacked away in foreign banks in Europe. He told participant that if that amount of funds is repatriated an d invested in the Nigeria economy it would recover from the its present state of prolonged recession.
Only two weeks ago the British High Commissioner to Nigeria while on a visit to BPE said that Nigerians living in Britain have made money and were willing to bring back such money to invest in Nigeria privatisation.
Affected banks by the CBN capital verification are leaking their wounds as it mean a colossal loss to investors and the banks that have spent a considerable amount of money to mobilise the funds. The banks are also murmuring over the length of time it takes the apex bank to conduct the capital verification exercise.
According to banking sources in the case of Access Bank the exercise stretched over three months while that of Intercontinental is also close to three months. Bankers argue that it has taken the apex bank over three weeks to conclude verification of private placements made by some banks.
More disturbing to bankers is the fact that shares that have already been allotted are being cancelled on the order of the capital verification team of the CBN. The issue of capital verification they argue was not part of the initial policy pronouncement of the CBN and wondered Why the policy somersault? They question the rationale of CBN changing the rules in the middle of the game and see the retroactive decision to void shares already allotted as unhealthy for the economy. WasnÃìt it the CBN officials and other regulatory authorities that scrutinised, approved and authorised the allotments sources querried? Rejection of dollar-denominated investments Under the capital verification exercise, bankers say will discourage direct foreign investment. This banking sources say contradict the much touted federal government micro-economic policy of encouraging direct foreign capital inflow
Sources in the industry are also at a loss with the CBN rejection of shares purchased by cash as it was gathered that the CBN is voiding all shares purchased by cash. Bankers argue that in a cash based economy like Nigeria this decision is rather hypocritical.
The concomitant effect of the above move by CBN is a sure crisis confidence that will trigger investorsÃì apathy to ongoing and subsequent public offers.
According to investors and investment analysts, the action of CBN is a major setback to the ongoing financial deepening of the capital market
Sources close to CBN said the capital verification exercise is only but a smokescreen to frustrate banks from achieving the minimum capital base of N25 billion through the capital market and force banks into mergers and acquisition so it can achieve its ultimate aim of reducing the number of banks to about 12.