Nigerian Exchange Freezes Five Banks' Share Prices

By Bloomberg
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By Vincent Nwanma
Nigeria's stock exchange froze the share prices of five banks after their chief executive officers were fired by the central bank last week.

The affected banks are Afribank Nigeria Plc, Intercontinental Bank Plc, Oceanic Bank International Plc, Union Bank Nigeria Plc and Finbank Plc. While trade in the stocks can continue, their prices won't change, Sola Oni, head of corporate affairs at the Lagos-based exchange, said in an interview yesterday.

Central Bank of Nigeria Governor Lamido Sanusi fired the chief executives on Aug. 14, saying the lenders were in a “grave situation” and the banks' management had acted in a manner detrimental to the interests of depositors and creditors. The central bank will also inject 400 billion naira ($2.55 billion) into the lenders.

“Whenever there is a development like this, technical suspension is one way of protecting the investors pending the time that the atmosphere becomes clear,” Oni said. The suspension will be lifted “once the atmosphere becomes clear.”

Eurasia Group, a New York-based research company, said in May that banks in Nigeria, Africa's second-biggest oil producer, may have as much as $10 billion of toxic assets. The bad debt is partly the result of at least 1 trillion naira of margin loans used to buy shares as equities soared almost 13-fold since 2000, according to Bank of America Corp.

Nigerian President Umaru Yar'Adua endorsed the removal of the chief executives, which was aimed at preventing “fresh bank failures,” according to a statement published on the Web site of the Nigerian presidency yesterday.

The president “wishes to assure all Nigerians that their deposits in Nigerian banks are safe as the federal government will continue to act in concert with the CBN to ensure that no bank is allowed to fail or become distressed,” Yar'Adua's spokesman, Olusegun Adeniyi, said.