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Ecobank under fire over chairman's N3b debt

By The Rainbow
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The Public Investment Corp., which is the biggest shareholder in Ecobank Transnational Inc. (ETI), wants an immediate action by board of directors of the bank on the insider borrowings by the Chairman of the board, Kolapo Lawson.

Businesses associated with Lawson is said to owed the bank the bank 1.6 billion naira ($10 million and a further 1.4 billion naira of borrowings had been sold to the state bad bank AMCON..

'We have written a letter to the board of directors, a confidential letter, requesting the board to quickly find time and space to discuss this matter so we can resolve it properly,' Daniel Matjila, the chief investment officer of the Pretoria-based PIC, said by phone today. The PIC didn't ask that the chairman be replaced, he said.

The Central Bank of Nigeria informed Ecobank in April that Lawson failed to honor a pledge to repay debt owed to the Asset Management Corp. of Nigeria, the London-based Financial Times newspaper reported on Tuesday, citing documents it has seen.

The PIC, which manages more than 1 trillion rand ($101 billion) mostly on behalf of South African civil servants, bought 20 percent of Lome, Togo-based Ecobank in April last year. Nedbank Group Ltd. (NED), a South African bank controlled by London-based Old Mutual Plc (OML), has an option to buy 20 percent of Ecobank in November. Nedbank Chief Executive Officer Mike Brown declined to comment in an e-mailed response to questions.

ETI, however, said  on Wednesday that debts owed by businesses associated with its chairman were performing and there was no doubt they would be repaid.

Ecobank spokesman Jeremy Reynolds said companies linked to chairman Kolapo Lawson owed the bank 1.6 billion naira ($10 million and a further 1.4 billion naira of borrowings had been sold to the state bad bank AMCON.

“So there is no question of him not settling debt,” Reynolds said by phone. He said the debt owed to Ecobank was recently rated by the Nigerian Deposit Insurer (NDIC) as “performing”.

The Financial Times reported late on Tuesday that the bank was caught up in bitter boardroom squabbles about the borrowings and that the lender’s leadership faced a crisis of confidence among some shareholders.

The FT said it had seen documents showing that the central bank notified Ecobank in April of Lawson’s failure to make good on promises to repay the loans passed to AMCON.

Lawson could not be reached by Reuters for comment and a central bank spokesman said AMCON and Ecobank were better placed to comment on the FT report. AMCON declined to comment on the basis of confidentiality.

Renaissance Capital repeated its “buy” rating on Ecobank with a price target of 18.8 naira per share, saying the loan issue was insignificant compared with the bank’s fundamentals.

“The $10 million loan represents 0.3 percent of Ecobank Nigeria’s first quarter loan book,” Rencap analysts said.

ETI shares, which have risen 33 percent this year, were flat at 15 naira per share by 1130 GMT.

In 2009, Nigeria’s central bank had to inject $4 billion to support nine banks after reckless lending left them so undercapitalised that they posed a threat to Africa’s second largest economy and top oil exporter.

Reynolds said the debt issues were discussed at board level and no attempt has been made to write off the loans. He said the central bank had written to enquire about the loans and Ecobank had cooperated fully with the regulator’s requests.

Since 2009, a number of banks have been restructured, and AMCON, the Asset Management Company of Nigeria, set up in 2010 to help recapitalise lenders following the bailout, has absorbed the toxic assets.

Ecobank's shares have increased 33 percent this year through yesterday's close in Lagos, Nigeria for a market value of 192.5 billion naira. The 10-member Nigerian Stock Exchange Banking 10 Index has increased 25 percent.