CBN okays ETI, Oceanic Bank merger talks

Posted by admin CBN (Central Bank of Nigeria), General Politics, Latest Politics Sunday, July 31st, 2011

Bank International Plc yesterday announced entering into a transaction implementation agreement with Ecobank Transnational Incorporated (ETI) as the Central Bank of Nigeria (CBN) approved merger and acquisition talks by both banks.

The development came as CBN Governor, Sanusi Lamido Sanusi, disclosed readiness of the stakeholders in the banking industry in Nigeria to publish in national dailies names of their debtors as a way of quick recovery of money owed them.

Meanwhile, Rivers State Governor Chibuike Amaechi has again explained why his administration plans to issue bond at the capital market to fund major development projects.

The Oceanic Bank’s re-capitalisation announcement came on the heels of reports that some financial institutions had expressed interest to acquire the CBN-bailed out bank.

Speaking to the media yesterday, Group Managing Director and Chief executive Officer of Oceanic Bank, John Aboh, stated that following the completion of extensive selection process and negotiations, it had entered into a Transaction Implementation Agreement (TIA) in respect of its re-capitalisation with preferred bidder, ETI, and that the CBN had no objection to the agreement.

The CBN last month gave the rescued banks until September to re-capitalise or face nationalisation or liquidation, and as an incentive, it extended the inter-bank guarantee to intervened banks that had signed the TIA to December 31.

Aboh stated that the execution of the TIA represents an important milestone in the process of re-capitalisation as the bank and ETI have begun the process of seeking shareholder and regulatory approvals in accordance with relevant laws of the government, including provision of full transaction details to shareholders at the appropriate time. He further advised shareholders to exercise caution when dealing in the bank’s share until full transactions details are disclosed.

According to Aboh, the Board of Directors of the bank expressed confidence that a transaction will be completed within the required time to comply with the CBN’s deadline of September 30.

He added that the bank’s ranking among competitors would rise to between second and third largest with depositors and branches if the re-capitalisation bid pulls through as Oceanic Bank has 370 branches while ETI has over 213 countrywide.

“Ecobank transnational is the parent company of Ecobank Group, a pan-African banking group with operations in 31 African countries and France, as well as representative offices in South Africa, London, Angola and Dubai,” Aboh said, noting that the final outcome of the agreement will be subject to the approval of the regulatory authorities, court of law and shareholders of both banks.

The Guardian learnt that ETI is yet to publicly announce its involvement in the deal owing to regulatory issues.

The bank will formerly notify the Nigerian Stock Exchange, Togo and Ghana Stock Exchanges before any public announcement could be made, The Guardian also learnt.

This important step, The Guardian was informed, may be taken today paving the way for the public signing of a Memorandum of Understanding (MoU) between the two banks later this week, possibly tomorrow.

On the planned publication of banks’ debtors, Sanusi said many customers of Nigerian banks allegedly have poor attitude to lending system, warning that financial institutions would not operate like Father Christmas, hence the resolve to promptly recover all the debts owed the banks.

The CBN boss lamented that despite the contributions of the Small and Medium Scale Enterprises to the socio-economic development of the country, studies still showed that the greatest obstacle to the success of many small businesses is lack of access to finance.

Speaking at the second economic development seminar, titled, “Banking reforms and the Nigerian economy: Coping strategies for small and medium enterprises”, organised by the Kwara Chamber of Commerce, Industry, Mines and Agriculture (KWACCIMA), in Ilorin at the weekend, the CBN governor who was represented by the Deputy Governor (Economic Policy), Dr. Sarah Alade, said most Nigerians, either big or small business people, do not think they should pay back bank loans, saying they see it as share of the national cake.

The financial expert, who said that some of the entrepreneurs use the money borrowed for business growth on frivolities such as marriage and burial, added that the banks had resorted to publishing the names of such debtors in newspapers as part of measures to recover the money borrowed.

A statement by the spokesman to the Rivers State governor, Mr. David Iyofor stated that the bond would be tied to funding specific development projects.

The projects, he said, include the Greater Port Harcourt City, the Port Harcourt Monorail project, the new Rivers State University of Science and Technology Phase 1, Monte@Rivers (an entertainment complex), the Port Harcourt Ring Road (that would connect the old city and Greater Port Harcourt) and a new M-10 Highway (a beltway that would link the Port Harcourt International Airport to the Onne Sea port).

Iyofor explained that such gigantic projects would need immediate and massive funds injection to complete them. Hence Rivers State plans to approach the capital market in October 2011 to raise these funds.

He added that already, the House of Assembly has given the nod for the governor to go ahead and obtain the bond as such projects cannot be accomplished by sheer reliance on Federal Allocation and Internally Generated Revenue that come in trickles.

Explaining further the details of the bond, the Commissioner for Finance, Dr. Chamberlain Peterside said: “These long term capital projects that are capable of catalyzing the industrialisation and transformation of Rivers State require massive financial investment that can only be obtained from the capital market.

“The proposed size of the first tranche of the bond will be about N100 billion with five years tenor, whereas the total bond programme of N250 billion is envisaged over the next several months,” Peterside said.

Rivers State remains very buoyant financially with sizeable revenue accruing from both the Federation Account and IGR. The state has set a target of earning at least half of its total revenue from IGR over the next one to two years.

According to Peterside, “whilst energy prices remain relatively high on the world market in an atmosphere of somewhat low to moderate interest rate, Rivers State would benefit from a bond issue at this stage through leveraging its high income potential and favourable credit rating, coupled with a debt portfolio that is currently low at less than N30 billion.”

“The economic indicators of the state, including annual Gross Domestic Product of about N30 trillion compared to its debt stock are positive attributes that Rivers State can ride on to raise additional funds to finance its long- term development agenda and fast track social and economic growth.” he said.

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