Should banks’ solvency be dependent on governments’ deposits or capital base?
An issue of urgent financial importance is building up to boiling level in the nation’s banking sector.
Otherwise, since the introduction of Treasury Single Account (TSA) policy by the federal government in September 2015, there had been rising cases of excuses by several Deposit Money Banks, asking for more time for them to pay up all deposits by Ministries, Departments and Agencies (MDAs) to avoid running into bankruptcy.
Several finance experts who spoke to Business Hilights on this matter said it amounts to robbery for any bank or banks to rely their solvency ratio on huge deposits by governments.
According to them, banks should grow from their initial capital base and expand businesses which will continue to add value to investors and shareholders from time to time and not to rely on government’s deposits.
In an interview with Dr. Ken Igboanugo, he said “Any bank that is leaving on deposits by government is structured to drive corruption and does not have the moral and business attitude to exist.
“Any bank that cannot stand on its own if government’s deposits no matter in any denomination are withdrawn has no business in the industry because such a bank can do anything criminal to continue to remain afloat as it has no other business than warehousing government’s money.
Many of the experts who barred their minds on this issue, called on the Central Bank of Nigeria (CBN) to make out time to conduct another round of stress test for banks to avoid sudden collapse of any bank should governments decide to take their money at all cost in future.
Besides, such scenario does not mean level playing ground in the banking industry when some banks are leaving on public fund whereas others are struggling out there to build their capital base in real banking business.
It would be recalled that the Nigerian Ports Authority (NPA) had been battling Heritage Bank since the appointment of Hadiza Bala Usman over some amount in dollar account at the bank which is yet to be moved to the TSA.
Seconding a motion moved by the senator representing Kogi West Senatorial District, Dino Melaye, on Tuesday last week, the Chairman of the Senate Committee on Petroleum (Gas), Senator Bassey Akpan, said his committee was already investigating similar issue.
Melaye had alleged that the NNPC and some joint venture companies were operating the account under the name, Brass LNG Limited instead of paying every money into the TSA.
According to Akpan, the monies were not only with Keystone Bank, “we also have some money stuck in Diamond Bank.”
Senator Akpan made a salient revelation when he observed that as the Federal Government started to run the TSA system, many Deposit Money Banks became insolvent as many account balances in dollars were stuck in the banks.
Moving a motion on the matter at the plenary on Wednesday, Melaye said, “The Senate notes that the Brass LNG was incorporated by the Corporate Affairs Commission on 9th of December, 2003 and is limited by shares of $1m.
“The Senate observes that the shareholders of this company are the Federal Government (NNPC) represented by Mr. Funsho Kukpolokun, with $490,000 shares; Philip Brass Limited, whose address is in the Cayman Island, British West Indies, represented by Mr. R. L. Smith, with a share capital of $170,000; Eni International B.V., with address in Amsterdam, Netherland, represented by Mr. A. Forzoli, with share of $170,000; while the fourth shareholder is Chevron Texaco Brass LNG Limited, with address in Bemuda, represented by Mr. J. R. Pryor, with a share of $170,000.
“The Senate observes that from the CAC records, the following are directors of the company among other foreigners: Gauis Obaseki Jackson, former Group Managing Director, NNPC; Yakubu Andrew, former GMD, NNPC; Ibogomo Gbeyansa, staff member of NNPC; Dawa Joseph Thlama, staff member of NNPC; Ige David, staff member of NNPC; and Mr. Buba Mohamman.”
He added, “The Senate observes that from the memorandum of understanding, the Brass LNG is supposed to be a Joint Venture Company, with the NNPC having the controlling shares and their account domiciled with the CBN.
“The Senate is surprised that the account of this company is with Keystone Bank opened on the 1st of August, 2012, with account number 1005825168, a USA domiciliary account with a closing balance of $137,086,462:54 currently, while the sum of $648,179,487 was recorded as the account’s last inflow on the 19th of September, 2016, and a withdrawal of $4m was effected on the 18th of November, 2016 without BVN.”
Melaye stated that there was an urgent need to define the position of the company and its operations, management and mandate in order to halt “this seeming corruption.”
