The Nigerian Tribune had an article today on the complaints of the stakeholders of the banks taken over by the CBN.

You can read excerpts of the report below. My comments follow.

NIGERIAN shareholders have accused the Central Bank of Nigeria (CBN) governor, Mr. Sanusi Lamido Sanusi, of having a hidden agenda on the proposed sale of bailed out banks, stating that they will resist any backdoor takeover of their banks.

The shareholders, who spoke with the media in Abuja, at the weekend, said the CBN action of doling out N420 billion as bailout to these banks was suspicious.

According to them, the apex bank did not consult the boards of the affected banks before doling out the largesse which they said was poisonous to the banks.

The President of the Independent Shareholders Association of Nigeria and a major shareholder in many Nigerian banks, Sir Sonny Nwosu, in one of the interviews, stated that he suspected strongly that the recent action by the CBN governor to inject N420billion equity funds and the removal of Managing Directors/Chief Executive Officers of five banks was part of a hidden agenda.

“I strongly believe that there is a hidden agenda. The reason being that the first press conference by Sanusi which eluded our own people (journalists), was published by the other side (Financial Times of London). It was stated there that the door would be opened to foreign banks to take over the banking institutions in this country and, in fact, come in to establish banks in this country. And in the process you know these banks would be taken over,” Sir Nwosu said.

He said, “some of them could have been taken over as a way of opening the door for these foreign people. And you know Nigerians, I’m not saying that this is so, but I’m saying as a speculation. Someone can go to Dubai from Nigeria and set up a small company there and before you know it, they will say he is a foreign investor coming into the country to take over hard-earned investments of ordinary share holders.”

He continued: “Now, CBN gave out money to these people. Did they ask for the money? This is another way of tying down and they said it is only the appointed MDs from them that will and accept this money. Because the board may not want the money and this money is another way of saying we have given loans, we are converting it to equity.

“Yes, he has already said so. He said the first instance of five years, that the CBN has the option to convert to equity and you know what that means. It’s like taking away our hard-earned investments. Well, I don’t think we will take that,” he vowed.

The outspoken shareholder regretted that in other climes, approvals were sought from the Senate before such actions were taken but not so for Nigeria. “So, we are running a democracy. All the interventions overseas were very clear, as they went to their Senates to seek approval to pump in money there and once you accept the money they either ask that they will give you a board or will dissolve. In the US, one is given loan and the government has a partial control somewhere.

“What is our Senate doing? You can see the Senate and the House of Representatives saying yes they have done the right thing. Taxpayers’ money — N420billion — that never passed through the Senate.”

On the legal front, he made reference to the regulatory law, the Banks and Other Financial Institutions Act (BOFIA), which he said did not approve such actions. “We are also talking about BOFIA, amended BOFIA. We need to salvage this country from any individual.”

On the next line of action , the shareholders, who are in different associations, said they were waiting as events unfold, adding, however, that any action on the part of the CBN to take over their investments would be resisted with their blood.

I agree with most of their concerns. Here are my issues:

1. Is it lawful for the CBN to just go ahead and take over these banks? Especially since it involves taxpayers’ money.
2. The audits of the other banks are still continuing. Why not wait until the audits are completed before taking any actions?
3. Were these banks on the verge of immediate collapse?
4. It seems that the board of directors of these banks were not consulted. Neither were the banks given any opportunity to make their case.
5. The fact that the audit of the other banks gives other banks that might even be in worse shape enough time to press their debtors and collect the money owed them. At the end, these other banks will seem to be in good shape as they were able to retrieve some of the money owed them.

At the end, I think the CBN blew this. They should have waited until the audit was completed.