Nationalisation of Nigerian banks welcomed

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Stockbrokers have hailed the nationalisation of three Nigerian banks as the best thing to happen to the country’s financial markets.

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Mainstreet Bank Limited, Keystone Bank Limited, and Enterprise Bank Limited were acquired by the Asset Management Corporation of Nigeria (AMCON) last weekend.

The takeover by the government institution led to a decline in investment and loses in Nigeria’s stock market.

But Nike Itegboje, the president of the Chartered Institute of Stockbrokers (CIS) told journalists that market operators supported the nationalisation of the three banks.

“It is a clear sign that the banks would not die,” Itegboje said.

“Depositors are now guaranteed of the safety of their deposits and the banks would now be well capitalised for future listing.

“Brokers are therefore, in full support of the action because it has removed uncertainty and brought big relief to the system.”

Itegboje added that share prices were plummeting because people were afraid of the unknown.

He said it would have been problematic if AMCON had not stepped in to buy the assets from the banks.

“Many people are afraid because they do not understand the situation,” Itegboje said.

“But I am telling you that the action of the Central Bank of Nigeria (CBN) is in the best interest of the financial system in general and stock market in particular because the depositors would not lose their money, while the banks would be recapitalised for future listing on the NSE again.”

However, analysts at Renaissance Capital (RenCap) argue that the new banks will now depend on the central bank’s funding beyond the interbank guarantee to remain stable.

RenCap predicts that to fund the lending and liquidity needs of the three new banks, the banks will need to be more engaged in repurchase transactions with the CBN.

The chief executive officer of the Nigerian Stock Exchange (NSE), Oscar Onyema said the move by the CBN, Nigerian Deposit Insurance Corporation (NDIC), and AMCON would end the banking crisis and help stabilise the Nigerian financial markets.

According to Onyema, the NSE briefed the brokers’ before the commencement of trading on August 8 and this helped forestall a possible slide of the NSE.

AMCON acquired the three banks through a subscription agreement that injected a total of N679 billion into the new banks on August 8 and appointed the board and management of the new banks.


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