Nigeria Content Online

Reprieve
may have come the way of Unity Bank and Wema Bank, following the
decision of the Central Bank to extend the deadline for their
recapitalisation.

The
banking industry regulator in September 2009 gave both banks until June
30 to recapitalise. However, when it became increasingly difficult for
both banks to meet the deadline, the Central Bank extended it.

Mohammed
Abdullahi, the Central Bank head of corporate affairs, confirmed this.
“The truth of the matter is that we are extending the deadline for
them.”

But
a statement posted on the Central Bank website last night, ostensibly
after enquiries by a NEXT reporter, said that 30 September is the new
deadline for the two banks. “We wish to inform the general public that
due to unanticipated three months extension in timeline for setting up
Asset Management Corporation of Nigeria (AMCON), the Central Bank of
Nigeria has granted a three months extension for the two banks to
recapitalise.”

Banks’ strategies

Both
banks decided to adopt different strategies to meet the target date.
Wema Bank opted to raise N49 billion from both local and foreign
investors, as well as rely on the proposed Asset Management Company
(AMCON) to raise additional N10 billion. Unity Bank, on the other hand,
hopes to meet its recapitalisation target from existing shareholders
through a rights issue. The issue, which opened on 4 June was expected
to close by 13 July, well after the deadline set by the Central Bank.
The rights issue was intended to raise about N23.9 billion.

Some
stockbrokers who spoke under anonymity, said the bank may have adopted
direct marketing to execute the sale of the rights offer. According to
the managing director of one of them, “Not many of my clients have
Unity Bank shares, and so far I have not received any request to buy.
Don’t forget that the primary market is still very fragile and people
do not have confidence in banking stocks right now. So, accessing funds
from the primary market may not be easy for the bank at this time.”

He
said the bank may have done its campaign to its high networth
shareholders who may be willing to retain their stake in the bank.

Current realities

Tunde
Olofintila, head of corporate affairs, Wema Bank, said the former
deadline was no longer feasible. Mr. Olofintila said the bank had
mapped out its recapitalisation plans and was in touch with the Central
Bank on the progress made. He said Wema Bank plans to raise equity from
the Bank of Industry (BoI) and the Asset Management Corporation of
Nigeria, expected to take off in the next few weeks.

“We have laid out all these plans and we reached an agreement with the CBN. The 30 June deadline may no longer stand.”

In
addition, he said the bank is applying for a regional licence instead
of its current licence, which allows it to operate across the country.
On the implication of this, he said some of its branches will have to
go. “Yes, just a few of our branches will have to go. Maybe 16 or 17
out of 154 branches,” he said. Efforts to get official comments from
Crispin Uduobuk, head, media relations of Unity Bank, did not yield any
result as he did not pick his calls.

Both
banks were accused by the Central Bank of not meeting the N25 billion
minimum capital, which deadline ended on 31 December, 2005.

Also,
during the stress test conducted by the Central Bank last year, both
banks were found to have failed the liquidity criteria, capital
adequacy ratio, and corporate governance, and yet did not sack the
management of the two banks as it did for the other seven banks which
did not meet these criteria.

In
addition, both banks were not up to date with publishing their
quarterly and full year result, in clear violation of Central Bank
rules.