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THE Central Bank of Nigeria (CBN) has advised shareholders and board of directors of the rescued banks to critically examine the institutions and strategic investors that are indicating interest in their banks before consideration.
The Deputy Governor, Financial System Stability, Central Bank of Nigeria, Dr. Kingsely Moghalu, who stated this recently in a forum, stressed the need for shareholders to consider not just who has the money to invest, but who is most likely to bring higher standards of corporate governance and risk management, the absence of which ran their banks aground in the recent past.
He pointed out that this became imperative as investors and shareholders have expectations regarding safety of their investment, transparency and useful disclosures that would inform investment decisions and generate good returns on investment, which according to him, necessitates CBN banking reform programme. ÂÂÂ
He explained that the audits of the banks’ new standards of disclosure as well as the transparency that are now applied in the industry as a result of the banking reforms would serve the long term interest of individual, institutional investors and shareholders who now have a better picture of the state of the Nigerian banks and the industry at large.
Moghalu said shareholders of Nigerian banks should appreciate the development, even as they may “understandably be disappointed†at the reduced value of their equity in these banks as a result of the mismanagement of fund by the previous management.
He therefore urged shareholders of these banks to collaborate with their interim managements, board of directors and the CBN in their effort to restore the value of the shareholders’ equity through the creation of the Assets Management Company (AMCON) and the process of engaging into strategic partnerships, recapitalisation, mergers and acquisitions.
“This is the best strategic course of action that will aid the recovery of the capital market and a return of bank shares to fair value. Shareholders need to understand that the CBN reforms are ultimately in their own interest. Their approval will be required for the consummation of various transactions,†Moghalu said.
He stressed the need for investors to understand the balance between shareholders’ rights and the responsibility and powers of the regulator to ensure financial system stability in a time of crisis.
Moghalu noted that the major role the management of banks should play was to maintain advocacy and pressurise Nigerian government to ensure that the sweeping reforms in the banking sector are replicated in other areas of the economy such as power, transport and other infrastructure, manufacturing and SMEs, as well as a willingness to participate in and promote public-private partnerships.
He added that this was essential in order that banks will have outlets in the real economy to which they can lend with lower levels of risk, adding that if other areas of the economy, especially the power sector, do not open up, bank assets may go again into various kinds of speculative lending and create another asset bubble that will burst in due time.
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(Source: Guardian)
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