Aug 19, 2009

Transcorp is listed as owing Union Bank 31 billion naira, and Intercontinental Bank 6.6 billion. African Petroleum is listed as owing Afribank 12.8 billion naira, and Oando as owing Oceanic Bank 7.1 billion naira.

Former state telecoms monopoly Nitel, for which the government is seeking investors, is listed as owing 7.8 billion naira to Oceanic Bank and 3.6 billion to Intercontinental.

Aigboje Aig-Imoukhuede, the group managing director of Access Bank (ACCE.LG), is also listed as the director of a firm owing 16.2 billion naira to Intercontinental Bank.

Dangote Industries, part of a conglomerate which includes Dangote Sugar Refineries Plc (DANG.LG) and Dangote Flour Mills Plc (DAFM.LG), is listed as owing 2.5 billion naira to Oceanic.

WHY ARE THE ANTI-CORRUPTION POLICE INVOLVED?

President Umaru Yar'Adua has instructed all law enforcement agencies to help recover the bad debts. The Economic and Financial Crimes Commission has said it want to talk to 19 banking executives, including the five sacked CEOs, to take statements and "determine their level of culpability".

The central bank has pledged to prosecute anybody found guilty of misconduct but has declined to say whether specific infractions were exposed by its audit.

Analysts say criminal charges could be brought if executives are found to have falsified accounts or breached share price manipulation rules by setting up subsidiaries as vehicles to trade their own stock and push the share price higher, or to have bets on the stock market using depositors' funds.

WHAT ARE THE CHANCES OF RECOVERING THE FUNDS?

The debtors may only have to service the loans rather than pay the full outstanding amounts in one go, meaning the losses may be more easily recovered. This would make the banks more attractive to potential equity investors as they would more quickly be able to repay the capital injection.

The loan facilities could also be restructured.

The central bank audit estimated a minimum capital injection of 200 billion naira was required in order for the five banks to meet the minimum 10 percent capital adequacy requirement.

Its actual capital injection was twice that size, creating a buffer zone which means that even if the debts are not repaid, the banks are likely to remain safe for now.

Analysts say it will prove a key test of the Nigerian legal system if the debtors do not pay up, particularly given they include some of the country's richest and most powerful people.

reuters