FROM November 15, 2010, universal banking in the country will cease. In its place will be the new banking model that the Central Bank of Nigeria (CBN) has designed to keep the financial sector on an even keel.
Also, Finance Minister, Dr. Olusegun Aganga, told the House of Representatives yesterday that the implementation of the 2010 capital budget had been poor because Ministries, Departments and Agencies (MDAs) were slow in taking the necessary steps to comply with due process requirements.
Aganga, who addressed the plenary session of the House of Representatives on the implementation of the 2010 budget as it related to the capital budget, said that out of the N1.7 trillion budgeted for capital projects, a total of N749 billion had been cash-backed.
He added that only N397 billion representing 53 per cent of the N749 billion had been accessed and utilised by the MDAs so far.
On the revenue profile, the minister equally made it clear that the Federal Government had recorded shortfalls in the Internally Generated Revenue (IGR) just as he informed the lawmakers that the Federal Government had not accessed the revenue from signature bonuses.
He urged that all steps that were required by the Due Process Office regarding the execution of contracts for capital projects be given early attention by those in charge in the MDAs.According to Aganga, the 2010 financial year is very unique because it is the year that requires enough preparations for the 2011 polls.
In a document signed by the Governor of CBN, Sanusi Lamido Sanusi, and posted on the website of the apex bank yesterday, the bank stated that from the effective date, the definition of banking business shall be as contained in Section 66 BOFIA, stressing that the only types of banks that will be permitted to carry on banking business in the country shall be limited to the following types as contemplated under BOFIA: Commercial banks; merchant banks; and specialised banks, which include non-interest banks, microfinance banks, development banks and mortgage banks.
The document stated: “Accordingly, from the effective date, no bank in Nigeria shall be licensed to operate as a bank other than as one of the types specified in the section above.”
It explained that the commercial banks referred to in the section above may be authorised by the CBN to carry on banking business on a regional, national or international basis in accordance with rules, regulations, and guidelines on licensing, authorisation, operation and conduct of business that the CBN may issue from time to time.
Similarly, the non-interest banks referred to in Section 4 (1) (c) may be authorised by the CBN to carry on banking business on a regional or national basis in accordance with rules, regulations, and guidelines on licensing, authorisation, operation and conduct of business that the CBN may issue from time to time.
On general prohibitions, the CBN stressed that from the effective date, no bank shall establish, maintain or permit to exist, any related enterprise except:
• Pursuant to Sections 21(1) and 22(1)(c) of BOFIA;
• Such related enterprise is a banking institution incorporated outside Nigeria with the permission of the CBN;
• Such related enterprise is a company jointly established by two or more banks with the approval of the CBN for the purpose of promoting the development of the money market or improving the delivery of banking services in Nigeria; or
• Such related enterprise is a custodian.
The apex bank warned that from the stated date, no bank shall acquire real estate or immovable property other than as business premises for its own use, as may be authorised by the CBN, grant or permit to subsist, any loan, donation, gifts or any form of financial accommodation to any political funds, political party, or for political purposes whether directly or indirectly, incur any political expenditure.
It also banned banks from granting or permitting to subsist, any loan to any persons to invest in the primary issues of any stocks of any bank or grant any loan or any form of financial accommodation to any person or enterprise to facilitate the acquisition of any related entity from which the bank is divesting in compliance with this regulation.
Based on that, it stipulated that where a bank currently engages in any of the activities prohibited under Section 5(1), and Section 5(2) (a), such bank shall forthwith take steps to:
• Divest from all related enterprise (other than as permitted in Section 5 (1)) in accordance with Section 8; and
• Ensure that not later than the effective date, all its interests in any real estate or immovable property acquired other than as permitted in Section 5 (2) (a) are disposed of.
On compliance plan, the CBN stated that not later than 90 days from November 15, 2010, every bank currently operating under a universal banking licence shall submit for the approval of the CBN, a compliance plan duly approved by the bank’s board of directors.
It added that the compliance plan shall contain such information as the CBN may prescribe from time to time, including the type of banking licence that such bank proposes to operate pursuant to Section 4; and a detailed proposal on how the bank intends to comply with the provisions of this regulation, and business justification for the approach proposed; and such information, document, and reports as the CBN may from time to time specify.
It also noted that the CBN in reviewing the compliance plan shall consider the fairness of the proposal to all stakeholders, particularly, the depositors and shareholders, and may request such additional information, documents, and reports, as it may consider necessary.
Explaining that where the CBN considers the compliance plan satisfactory, the apex bank shall grant such a bank an approval-in-principle, pursuant to which the applicant bank shall forthwith begin the restructuring of its operations and affairs for the purposes of bringing them in conformity with the provisions of this regulation and the compliance plan.
Explaining the mode for divestment, the apex bank stated that where a bank maintains a related enterprise other than as permitted in Section 5(1), such bank shall take immediate steps to divest its interest therein completely not later than the effective date.
It further explained that where the bank resolves to divest its interest in a related enterprise in accordance with Section 8 (1) above, such bank shall ensure that (a) the divestment is transparent and carried out on an arm’s length basis in accordance with all the relevant laws, and any rules made by the CBN, in that regard, interests of all stakeholders, particularly those of the depositors and the shareholders of the bank are taken into account, and (c) more importantly, the long term financial viability and soundness of the bank is well protected and assured.
The CBN added that where the shareholders of a bank resolve to acquire or hold the interest of the bank in the related enterprise, such bank shall ensure that (a) the acquisition, transfer, arrangement, scheme, reconstruction or reorganisation are transparent and carried out on an arms’ length basis, and in accordance with all the relevant laws, and any guidelines or rules provided by the CBN in that regard, (b) interests of the depositors of the bank are taken into account, and (c) more importantly, the long term financial viability and soundness of the bank is well protected and assured.
Aganga said: “We had to amend the budget to give the Independent National Electoral Commission (INEC) the sum of N87.7 billion. We have equally realised the essence of the regular power supply and so we gave an extra-budgetary amount of N200 billion to the power sector out of which the sum of N57.7 billion has gone to the funding of the monetisation arrears of PHCN staff.”
He expressed government’s determination to cut expenditure but lamented that this year alone, capital expenditure rose by 71 per cent. Lawmakers had expressed concerns about the failure of government to implement the 2010 budget well particularly the aspects of capital budget.
Adopting a motion sponsored by its Minority Leader, Mohammed Ndume, and 15 other members, the House had resolved that it would ascertain the level of implementation of the 2010 budget before it received the 2011 budget proposal from the executive
Presenting the motion, Ndume declared that it had become worrisome that the Federal Ministry of Finance had consistently refused to release the amounts allocated for capital projects in the 2010 Appropriation Act.
“We are in the last quarter of the year and the ministry has only released less than 30 per cent of the capital allocation to the MDAs.
Ndume stated that the alleged non-release of funds for the implementation of capital projects was even more worrisome because the price of crude oil had risen well above the $57 per barrel benchmark to $80 per barrel.
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