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INVESTORS' N106.9BN TRAPPED IN WONDER BANKS

By NBF News
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A total of 560,882 claims has been filed with the Nigeria Deposit Insurance Corporation (NDIC) by members of the public, against 440 illegal fund managers/wonder banks amounted to a whopping sum of N106.94 billion. This represents about 41 per cent of the total insured deposit of about N4.94 billion.

Disclosing this at a recent media briefing, the Managing Director, NDIC, Alhaji Umaru Ibrahim, said that the corporation was fighting hard to address the problems created by the activities of illegal fund managers and wonder banks in the country.

He also disclosed that as at July, 2011, the corporation paid an aggregate of N2.024 billion to about 69,000 depositors of Micro Finance Banks whose operating licences were revoked by the Central Bank of Nigeria (CBN).

According to the NDIC boss, a joint inter-agency committee with members drawn from CBN, SEC, CAC, EFCC and NDIC also established that 36 companies accounted for the N104 billion or 98 per cent while Nospetco Oil and Gas alone accounted for 48 per cent.

He stated that with the efforts of the committee, the court appointed a liquidator to wind up one of the illegal fund managers, Sefteg Company Nigeria Limited adding that the committee was able to realise N500 million and had commenced verification and payment of investors of the company.

While reviewing landmark achievements of the Corporation since 1989 during the Corporation's special day at the 25th Lagos International Trade Fair, Ibrahim noted that the Corporation had been discharging its mandate creditably, thereby contributing to the safety, soundness and stability of the nation's banking system.

He said: 'As part of its landmark achievements, the Corporation commenced the implementation of risk based supervision in 2009 with 12 banks jointly examined by the NDIC and CBN. It also conducted a target examination of all the micro-finance banks in the system in February, 2010. The findings revealed the grave conditions of many MFBs, which led to the revocation of licences of 103 MFBs.

He was however surprised that despite their landmark achievements, the NDIC had been misunderstood by some members of the public, some of whom he said regard the corporation as an undertaker or an agency that focus its attention on bank liquidation.

He said: 'Similarly, concerned about the poor level of corporate governance, unguided credit boom and the unfortunate deterioration in asset (loan) quality of the insured institutions, the CBN/NDIC conducted a special examination of 24 deposit money banks in August 2009, which revealed that 10 of the banks were in grave condition.

'The findings from the examination led to the removal of eight CEOs of the distressed banks by the CBN, which also injected the sum of N620billion as tier 2 capital in the affected banks.

'While five of the banks, had either found willing merger partners/acquirers and (or) were making serious efforts to improve their financial condition through recapitalisation, the other three, namely Afribank Plc., Bank PHB Plc and Spring Bank Plc were apparently not making much effort that might yield meaningful results by the end of September 30, 2011 deadline.

'On August 5, 2011, therefore, the NDIC, pursuant to the provisions of the NDIC Act, and after due consultation with the CBN and the Federal Ministry of Finance, established three bridge banks for the transfer of the assets and liabilities of the Afribank Plc, Bank PHB Plc and Spring Bank Plc. The three banks were Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited respectively.

Among other benefits, the bridge banks mechanism not only safeguarded N809.4billion (USD5.5billion), it also protected jobs in the affected banks. In addition, the three banks were acquired by the Asset Management Corporation on the same day with an infusion of N678.8 billion (USD4.526billion).