N17 Billion Debt Scandal:Yar’Adua positions to take over BankPHB from Atuche

The recent uproar over a N17 billion debt scandal involving BankPHB may have given impetus to the Yar’Adua family to start listening to the argument of close aides of President Umar Musa-Yar’Adua on the strategic need for the President to set off the process of enabling his family to take position for more dominant roles in the ownership structure of the bank.

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Heavy Debt Burden: Banks suspend funding for Dangote’s cement project

A heavy debt burden and the anticipation of high profile competition for the share of the Nigerian cement supply side from Femi Otedola may have compelled Alhaji Aliko Dangote to call off investments with intent to expand production lines in his many cement manufacturing plants and to build new ones. Sources in the banking industry indicated that some bank’s exposure to Dangote have become quite high and more discomfiting for the banks in consideration of hurdles they would have to contend with in the effort to get the debt repaid.

Though Forbes Magazine had listed Dangote as the richest man in Nigeria in 2007, financial sector source said his total debt folio drawn from various Nigerian banks may add up to N622billion. According to the source, about N300billion was secured from a bank by Dangote to play in the stock market between February and March 2008 when prices of stocks were at their peak.

“Prices of stocks started falling soon after the investment in the stock market and the fall in prices have become protracted which has resulted in stock prices sliding to historic lows. This, apparently, has affected the repayment traction of Dangote and this had added to the depressing situation of the banks that gave out the fund,” the source explained.

According to the source, Dangote also secured a N75billion loan for Obajana Cement and N240billion for his cement production plant in Ibeshe while also funding his Alheri Engineering, the company that won the 3-G GSM licence and will manage the GSM telephony service provider in the Dangote group.

Dangote’s decision to beat a retreat from cement manufacturing besides Nigerian banks refusing to make their money available for his use, is the wholesale opening up of the supply side of cement through the cement importation scheme of the Federal Government.

Dangote had enjoyed near monopoly status on the supply side of cement in Nigeria, and not a few aspiring builders had protested persistent increase in the price of cement which got to a high of N1,800 mid 2008. The Federal Government under Alhaji Umar Musa Yar’Adua removed the protectionist policy of the Olusegun Obasanjo’s presidency which banned the importation of cement into the country and closed down some other Nigerian cement producing companies ostensibly to protect the manufacturing essence of Dangote Cement production subsidiaries and the other players in the sector.

“This did not help price at all, because just a few producers can come together to determine the price of a bag of cement,” an industry player told FORTUNE&CLASS Weekly.

The Federal Government’s bid to beat down the price of cement by flooding the market with imported brands may have started impacting the market as the price of a bag of cement has come down to about N1,500 even as the imported brands are yet to fully land in the country.

Industry buzz, however, suggests that Dangote may also be worried with the licence granted Femi Otedola by the Federal Government to import two million tonnes of cement into the country as part of the effort to crash cement prices.

“The Federal Government had to consciously look out for a Nigerian business that has enough cash to back up the importation. It would not make sense to allow for importation of cement when you don’t have high profile business people that can mobilize enough funds to flood the market in the shortest possible time. That is why I think the Federal Government gave Otedola the licence to be involved in the importation of cement and I think he has a commitment to the Federal Government to sell at very cheap rate to Nigerians,” a source in the Presidency said.

OCEANIC BANK, BANK PHB AND STERLING BANK GET CBN LIFELINE

L-R, Cecilia Ibru, Oceanic; Francis Atuche, BankPHB; Yemi Adeola, Sterling

L-R: Cecilia Ibru, Oceanic; Francis Atuche, BankPHB; Yemi Adeola, Sterling

Nigeria’s version of the global credit crunch might have crystalised into a reality that may not be easily wished away. Reports from sources inside the Central Bank of Nigeria asserted that three banks in Nigeria have been given lifelines to shore up their liquidity standing. These banks according to the source are; Oceanic Bank Plc, Bank PHB and Sterling Bank. With the exception of Sterling Bank that secured a N90billion lifeline, the other two got N100billion funding in what banking industry analysts said is akin to a financial bailout for the banks.

This is coming on the heels of a meeting of chief executives of banks held on Tuesday, 15 October 2008. The high point of that meeting was the decision by the banks’ chief executives to formally request the Federal Government to intervene in the nation’s financial sector to forestall the effect of the ongoing global financial crisis on the system.

The committee of banks chief executives also agreed at the meeting to request the Federal Government to intervene in the nation’s financial market through a package of measures similar to those introduced in developed countries and that the Central Bank (CBN) should continue to support the interbank money market.

Reports indicated that the bankers would have preferred the United States of America and Europe’s option where government directly intervened to inject funds into selected crisis ridden banks and, in some cases, nationalizing the financial institutions that were strategic to the main-stream banking public but whose liquidity profile had become moribund.

Sources inside the Central Bank of Nigeria informed that the CBN Governor rather opted for the fiscal management approach. The CBN, had, before the meeting of the banks chiefs, granted the banking industry a concession through a circular directive of October 2, 2008 to restructure some of their capital market exposures to December 31, 2009. Interpreted, this concession allows banks not to make provision for non performing loans and other facilities that had gone into the nation’s capital market that had taken a dive for the deeps since March, 2008.

“Apparently, the concession was not enough to stave off the simmering threat of illiquidity banks were experiencing.” The CBN source said. “In response to the appeal of the banks chiefs, the CBN offered the option of an expanded discount window operation. The key elements of the expanded discount window operation provided the opportunity for banks that need to assuage their liquidity problems to use short term financial instruments, like overnight standing facility, treasury bills, federal government bonds and non-federal government securities as collateral to secure long term funds from the CBN. You know the CBN conducts liquidity mop up of the money market by selling treasury bills and also sell bonds to financial institutions, normally, treasury bills are due in 30 days while bond are due in period ranging from 90 days to 180 days. Now, to help the liquidity problems in the banking sector, the CBN, with the expanded discount window, allows the banks to present these short term instruments which the CBN will use as collateral to provide funds for them for repayment period of 365 days.” The source explained.

This option does not seem to have been effective, the Nigeria Inter Bank Official Rate, the rate at which banks lend themselves money, have continued to increase, spiking to as high as 21 percent last week. This may not be unconnected to the fact that just a few banks are in the position to lend money to needy banks. Fortune&Class Weekly reported last week that many banks chief executives continued to troop to First Bank Plc, to negotiate and secure funding to keep their operations going.

STANBIC IBTC BANK AFFIRMS BANKING INDUSTRY’s HIDDEN CHARGES

Have you watched the recent couple eating out at a restaurant television commercial of Stanbic IBTC? The television commercial is quite entertaining what with the embarrassment the couple had to endure at the restaurant. But, in fact, the message of the television commercial is succinct enough; it tells of the hidden charges to services rendered at the restaurant. You only need to translate the message to what obtains in the banking industry and you get the intention and direction of the message. While confirming the pervasiveness of hidden charges in banks credit and services offered to their customers, the StanbicIBTC television commercial message affirms that the bank does not engage in the unsavoury conduct of padding up customers’ charges with undefined hidden charges.  

REVELATION OF CBN’S DISTRUSTS OF NIGERIAN BANKS

They say the Nigerian banking industry has some of the finest brains in the whole of the black African continent. Nobody should dispute this, if those white goons of the departed apartheid regime had not stayed longer than required, those South African banks that strut around telling who cares to listen of their grand size all would have paled into insignificance.

Okay, concede size and operating finesse to the South Africans, for Nigerians, our banks are getting bigger so much that account books sniffing sheriffs at the Nigerian Accounting Standard Banks, would informally tell you that it’s a most exerting task reviewing the books of the banks.

One tells of how some banks usually play the smart card on auditors:

“The bankers know that auditors can only work on figures provided for them, so besides traducing the figures, they may even confuse the entire process for the auditors. This they do by suddenly changing accounting software.

“We have seen banks that were using Globus, a banking accounting package, over the best part of a year only to suddenly change their software to Finnacle weeks before the external auditors assume. What the auditors meet on ground is certain to be absolute chaos because of the incompatibility of these two softwares. Eventually, the auditors are left to the mercy of the figures the banks wished them to see and treat.

You won’t believe which institution holds the banks in greatest suspicion? The Central Bank of Nigeria!  It is said that the CBN is so circumspect of banks’ figures that it makes a tradition of slashing the figures presented under some account headings. For instance, the CBN has over the past years made it a rule to slash any figure presented by banks under its total assets column by 70 per cent because the CBN believes that such figures are always over-inflated.

A case of connyman dies connyman bury am. (a dead dubious person would be buried by an equally dubious person)