By Toye Olori
LAGOS, Jan 24 1998 (IPS)

Nigeria’s government Monday made public the names of 12 merchant banks and 14 commercial banks that will be liquidated for failure to recapitalise by the end of last year.

Five other banks, which have taken steps to recapitalise, have been given until Mar. 31, or they will have their licenses revoked during the first week of April, the government said from the federal capital of Abuja.

Last year, merchant banks that were undercapitalised were given until March 31, 1997 to bring their capitalisation to 400 million Naira, and the limit for ailing commercial banks was set at 500 million Naira. (One U.S. Dollar is equivalent to 75 Naira).

But when most of them could not meet the deadline, the government extended it to Dec. 31.

During his budget breakdown earlier this month, the Minister of Finance Anthony Ani announced that 26 out of the 32 distressed banks recommended by the Nigeria Deposit Insurance Corporation (NDIC) would be closed by this March.

But bankers doubted the government’s political will to implement the liquidtion, based on past experience. This time, they were proved wrng.

Although the NDIC has tried to ae action against corruption in the banking sector, its efforts have met with lttle success, and ordinary Nigerans’ confidence in banks has ben eroded.

The NDIC has said that people who have their monies deposited in the banks up or liquidation will be paid a maximum of 50,000 Naira, irrespective of the amount they have deposited in the distressed banks.

But some Nigerians interviewed said this amount is no real compensation for their loss deposits.

“The arrests and detention or jailing of bank officials by the NDIC has not helped in the recaitalisation of such distressed banks, and this has made a lot of depositors poor. Till date, depositors have not been paid. Many would be depositors will now shy away from saving in the banks,” says Mike Uyi, a Lagos lawyer.

A Lagos-based businesswoman Safinatu Muhammed said the government should “…pay despositors at least 50 percent of their deposits in the liquidated banks. Government should also take steps to ensure that the remaining banks don’t go the same way.”

Industrialists and bankers believe the new tough approach will sanitise the banking sector.

“Investors and depositors had become more sceptical about the banking practice in the country following the massive frauds and subsequent distress syndrome which swept through the sector some years back,” said Adekunle Olumide, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), who spoke to IPS in his personal capacity.

“With the liquidation of the 26 terminally distressed banks, everybody can now hope that the sanitation in the banking sector is for real,” Olumide added.

J.P. Merino of the African Development Consulting Group Limited agreed. “It (the liquidation) will have a salutary effect on the economy and the banking sector in particular, if government sticks to its implementation,” Merino said.

The cleansing of the sector will reinforce confidence in the nation’s banking system as it will become clear that those left behind are the healthy ones, he added.

Describing the move as a step in the right direction, he said if properly implemented, it could spur the banking sector’s growth as the monumental cash outside the sector may gradually return to the fold when confidence returns.

But Femi Ekundayo, former President of the Chartered Institute of Bankers of Nigeria, said that liquidation as a last resort would not be poper without adequate consderation for the banks’ turn around efforts.

Ekundayo argued that some of the banks had put in much effort to survive and they required more time to start earning fruits. He called on the government to investigate how far the banks had gone and where a potential, reliable plan had been adopted, such banks should be spared.

Many of the distressed banks were products of the banking boom that gripped the Nigerian economy in the late 1980s and early 1990s when the government in line with its economic ref policies, liberalised the licensing of banks.

But the absence of efficient bank management, imprudent policies and fradulent behaviour on the part of some bank managers who spent customers’ funds, led to many banks’ eventual financial distress.

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