Aug 16, 2009
By Felix Onuah

ABUJA (Reuters) - Nigerian President Umaru Yar'Adua has instructed the country's law enforcement agencies to help recover bad loans built up at five banks rescued in an unprecedented $2.6 billion bailout by the central bank.

The apex bank injected 400 billion naira into the five ailing institutions and sacked their chief executives and top management on Friday in an effort to prevent a systemic banking crisis in sub-Saharan Africa's second-biggest economy.

"The president has directed all law enforcement agencies to give their fullest support to efforts by the new management teams of the five banks ... to recover the huge loans, the non-servicing of which placed the banks at risk of distress," Yar'Adua's office said in a statement on Sunday.

The central bank has said Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank will be run as going concerns until new investors can be found to recapitalise them.

The move by new Central Bank Governor Lamido Sanusi, who has been in the post only two months, sent shockwaves through the corporate establishment in Nigeria.

Between them the institutions account for 40 percent of banking sector credit in Africa's most populous nation and the executives removed included members of Nigeria's business aristocracy, long seen as almost untouchable.

"President Yar'Adua fully endorses the measures announced by the central bank ... to sanitise Nigeria's banking sector and prevent fresh bank failures with their attendant negative effects on the national economy," the presidency said.

"President Yar'Adua 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."
reuters