BY ONYEKA AJUMOBI ONOCHIE
The Nigeria Deposit Insurance Corporation (NDIC) and two stakeholders of the finance industry are presently locked in bitter feud over the former’s recent liquidation of the Fortis Micro-Finance Bank (MFB).
While the NDIC insists its action followed due process of the deposit insurance act, two stakeholders, Mallam Garba Kurfi, Managing Director of APT Securities and Fund and Mr. Boniface Okezie, National Coordinator of Progressive Shareholders Association of Nigeria (PSAN), in separate press statements, thought otherwise.
In the opinion of Kurfi, CBN and NDIC should have diligently managed the affairs of Fortis MFB rather than just embarking on its outright liquidation, even as Okezie insisted that the regulators were only aggravating the problems in the finance industry through the liquidation, observing that they should have devised other means of solving the brouhaha as done recently in the case of Skye Bank Plc, and even others in not too distant past.
Kurfi argued that managing affairs of the bank, its resale or the appointment of a new management would have been better for its depositors and other banks that had business relationship with it, as well as the economy at large, just as Okezie alleged that Nigerian shareholders, in general, were ultimate victims of the liquidation of banks without any hope of compensation.
These positions had so far, jangled the nerves of the NDIC as it sees them as figment of the observers’ illusion.
In a statement in Abuja, Wednesday, the deposit insurance corporation through its Head of Communications and Public Affairs, Mohammed Kudu Ibrahim, said, “Ordinarily, the NDIC would have ignored both erroneous claims, but for the need to correct the wrong impression which may be created in the minds of the public, thereby undermining public confidence in the banking system,” adding, “it is pertinent to state that both allegations are false and misleading in every material particular. Operators in the banking system are aware that the liquidation of ailing banks is always the last option adopted by the NDIC after other cost-effective resolution options have failed. In all instances, the safety of depositor’s funds is the primary concern of the Corporation.”
Ibrahim noted that depositors of banks always come first in the order of settlement of claims in the liquidation process, while, on the other hand, the shareholders of failed banks are always the last to be paid after the settlement of their depositors and creditors.
He stressed, “It is however, common knowledge that shareholders are part of the governance structure of the affected banks, through the control they exercise over the Board and Management of their banks during the Annual General Meetings and Extra Ordinary General Meetings, as well as through appointment of Directors and Auditors of their banks. Accordingly, they cannot be absolved from the misdeeds of their Boards.”
Addressing the concerned issue of Fortis MFB, he said, “With particular reference to the liquidation of the Fortis MFB, it would be recalled that Fortis MFB was licensed by the Central Bank of Nigeria (CBN) in 2007 and listed on the Nigerian Stock Exchange (NSE).However, in 2016, the shares of the bank was suspended due to failure to submit its 2016 audited accounts.
“It should be noted that the various examinations and supervisory interventions of CBN and NDIC revealed that the bank was being run in an unsafe and unsound manner leading to huge non-performing loans, high cost of funds (foreign and domestic borrowings, and fixed/term deposits), exorbitant administrative and personnel costs (especially high emoluments to successive CEOs), and poor corporate governance practices, all of which impacted negatively on its financial condition. As a consequence, the bank was illiquid, could not honour its obligations to its depositors, and became insolvent.”
He stressed that the unhealthy condition of the bank degenerated to the extent that the CBN removed the management of Fortis MFB Plc in February 2018 and appointed a four-person Interim Management Committee (IMC) to take over the control and management of the bank.
The IMC, he informed, comprised officers drawn from the CBN and NDIC, as well as an independent Chairman, who were mandated to steer the bank back to sustainability.
He said the IMC managed the affairs of Fortis MFB Plc for a period of 10 months during which it did all it could to resuscitate the bank and began reimbursing depositors, using funds advanced by CBN for that purpose.
The above, he stressed, is contrary to the claim by Mallam Garba Kurfi, that the CBN/NDIC made no prior attempt to salvage the ailing bank before its eventual liquidation.
“Unfortunately, due to the mismanagement of the bank by its erstwhile Board and Management, it could not be salvaged, hence its eventual liquidation,” he stressed, adding, “the general public is, therefore, urged to disregard the misleading claims and to remain assured that the NDIC will always be faithful and alive to its responsibilities in protecting Nigerian Depositors at all times.”
*Photo: NDIC Board