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Two Banks Seal Takeover Deal

Category: Money Market

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Two Banks Seal Takeover Deal




By Obinna Chima, 05 Mar 2011


Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi Friday said two out of the nine rescued banks have signed agreement with their preferred investors.


The CBN Governor, who said this in an interview with Bloomberg, stated that the process would be either through mergers or acquisitions, adding that four other rescued banks are close to signing takeover agreements.


He explained: “I can confirm that two banks have signed memorandums of understanding, I’m just not able to disclose their names because we do have an approval waiting from the Securities and Exchange Commission (SEC). One signed almost two weeks ago and one signed Thursday. We have two that are ready to sign in the next week or two,” and two others that are also close.”


The transactions are part of plans by the regulator to recapitalize the banks after they were declared sick by the CBN in 2009. However, since then, Wema Bank Plc and Unity Bank Plc have met with the recapitalisation hurdle that was set up by the CBN.


Sanusi also signalled that the Monetary Policy Committee (MPC) may raise interest rates for a second time this year as higher oil prices and state spending threaten to raise inflation, while the banking crisis eases.


The MPC had raised the Monetary Policy Rate (MPR) by a quarter of a percentage point to 6.5 percent on January 25 to help bring inflation down below 10 percent. He stressed that oil above $100 a barrel was making the apex bank’s job “more difficult” as the government increases subsidies on fuel imports.


While the banks have signed accords and four others are close to signing, agreements with another two lenders have been held up by “thorny issues,” Sanusi said. He added that, “the two other banks in financial trouble are “very tiny” and “frankly are not causing us too much concern.


“Because we import a lot of our energy, we don’t get the full benefit of the higher oil price because it translates into higher prices for the petroleum products that we import. The government is subsidizing those products, which then means you get an increase in government deficits and government spending. So my job gets more difficult managing those things.”


Source: Thisday

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