Global financial crisis: Bank chiefs beg FG for bailout   
Written by Babajide Komolafe & Peter Egwuatu, with agency reports    
Thursday, 16 October 2008  
*As oil price falls to $72 per barrel  

CHIEF executives of banks have decided to formally request the Federal Government to intervene in the nation’s financial sector to forestall the effect of the ongoing global financial crisis on the system.

Meanwhile, price of crude oil fell below $72 per barrel, the lowest in 13 months as recession fears raised concerns about a prolonged drop in energy demand.

This was one of the highlights of a meeting of Committee of Banks Chief Executive Officers in Lagos yesterday to discuss development in the industry especially the allegations that some banks were illiquid spread through text messages.

Besides, they resolved that all banks should issue internal memo, warning their staff to desist from spreading rumours aimed at de-marketing other banks, and that any staff caught in the act would be dismissed from the industry. It was also resolved that any bank caught de-marketing another bank would be blacklisted.

The committee also agreed to request the Federal Government to intervene in the nation’s financial market through a package of measures similar to the those introduced in developed countries and that the Central Bank (CBN) should continue to support the interbank money market.

The banks’ CEOs asked the CBN to issue a statement assuring the depositors of the safety of their money in the banks. In addition, they want the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to be positive in their utterances as they need to explain to investors the dynamics of the market vis-a-vis the normality of occasional up and down movement in the stock market which may result in capital lose or gain.

Against this background, the banks’ CEOs referred the capital market authorities to the October 11 edition of the Economist Magazine which noted that the crisis in the developed markets was an opportunity for African markets to shine and hence Nigerian banks should not shoot one another through negative utterances and de-marketing.  

Earlier in the week, governments across the globe introduced bailout plans to save their banking system from collapse. This include direct equity injection, guarantee for interbank loans, and depositors funds as well as lending to the banks.

Oil price falls to $72 per barrel

However, the price of oil slumped below $72 yesterday, its lowest level for more than 13 months, as recession fears raised concerns about a prolonged drop in energy demand, analysts said.

The global financial crisis will give a vicious twist to an economic slowdown and is hitting world demand for oil, although the effect on emerging economies is unclear, OPEC said yesterday.

The Organisation of Petroleum Exporting Countries (OPEC) slashed its estimate of growth in demand this year and shaved its estimate for 2009, largely because of an “excessive” easing of demand in the United States, the single biggest energy market.

Prices also fell yesterday on news that a Nigerian court has ordered Anglo-Dutch energy giant Royal Dutch Shell to hand over land to locals, a key demand of Niger Delta militants. Brent North Sea crude for November delivery fell to $71.60 a barrel —  the lowest level since August 2007 — before recovering to $72.41, down $2.12 compared to Tuesday’s close.

New York’s main contract, light sweet crude for November, shed $1.98 to $76.65.
Brent crude has fallen by more than half from a record high $147.50 in July, when prices rocketed on fears of supply disruptions.

Oil prices are sliding on “concerns that the coordinated action by central banks over the last week will not be enough to rescue economies from falling into a global recession and hence weighing on oil demand,” Sucden analyst Nimit Khamar said.

A top US central banker, Janet Yellen, said the United States “appears to be in a recession.” There are also growing fears Japan and Europe are heading for a spell of economic stagnation or recession.

The German economy is heading for a slowdown but the downturn will not be a long-lasting one, Chancellor Angela Merkel said Wednesday.

EU urged to rebuild World Bank, IMF

The European Union (EU) has been advised to rebuild global economic institutions, such as the International Monetary Fund and World Bank as part measures to stop current financial crisis

The Prime Minister of UK, Gordon Brown, who gave the advice yesterday, demanded the European Union to follow through on current financial crisis measures by rebuilding a “stage two” response to tackle the roots of the financial crisis.

The current £1.7 trillion European action plan was modelled on Brown’s blueprint to save British banks through recapitalisation, guaranteeing inter-bank lending and injecting cash into frozen markets.

But his new message— unpalatable to some EU leaders — is that future financial reforms must be global rather than European. He also gave no signal that Britain would soften its longstanding hostility to more European regulation.

“Phase two is to make sure that the problems that developed in the financial system, problems that we know started in America, that these problems do not return again,” he said.

“Ten or 20 years ago we had national and European capital markets. We now have global markets. If we are going to sort out global financial problems that are recognised as global so the IMF [International Monetary Fund] has to be rebuilt as fit for purpose for the modern world.”

The Prime Minister will use the Brussels summit today to rally European leaders behind a planned international summit to rival the Bretton Woods conference in 1944, which created the IMF and the World Bank to rebuild a world economy devastated by war.

Mr Brown has called for a reformed IMF to be transformed into a global early warning system, bringing together an international “college of supervisors,” and taking a direct role in the event of a new crisis.



http://nigeriamasterweb.com/paperfrmes.html

Please where are the bankers in the house?

Does anyone know what these CEOs are trying to bail out?

Is anybody in Nigeria accessing non-secured loans?

or how many people in Nigeria have their homes on mortgage?

Or are we bailing out because the west is bailing out their banks so we must even though there is no justification?

I need your thoughts on these please?

I was also unable to understand or comprehend the news. Really, i was just lost for words too. Maybe i am not seeing something that others are

lets wait and see the explanation for this

those CEOs are just looking for cash to steal.
What are they requesting a bailout for? Did they give us any loans?

egunje crunch is obviously affecting the nigerian economy

the wind of bailout is blowing freely . there is subprime loan in nigeria

bailout indeed

I thought as much. Another way to siphon the public fund.
Copycat Country

These banks also need to borrow from one another and from international banks. If the cash flow is non existent, they will be in trouble as well. That's one point of view.

I think the Nigerian journalists are the lazy one screaming bailouts! together with some illiterate law makers

you will notice the paper didn't mention any single CEO or so called bank chiefs, they keep writing abut 'experts' and reliable sources

how do you bail out banks they are announcing over 50% profit?

[url=http://www.guardiannewsngr.com/news/article02//indexn2_html?pdate=211008&ptitle=CBN%20stops%20banks%27%20bail-out%20plan] Guardian[/url]

Just really sad that, the govt and the leaders wanna use this as means to steal money again, cos the credit crunch is yet to affect nigeria, so i am not sure what bail out they wanna bail out in the tune of 6B$.
I am sure by the tme all these old fools are dead, our children's children will pray for them.

Mariory:

These banks also need to borrow from one another and from international banks. If the cash flow is non existent, they will be in trouble as well. That's one point of view.

Even if this was the case, which i have to point out based on reports it isn't, that would still not make any sense whatsoever since Nigeria has a pretty much non existent mortgage market or anything resembling a diverse or deloped economy for that matter. So what now, whenever banks want money they just stop lending to each other like a three year old throwing a tantrum? Again, based on news reports inter bank lending in Nigeria is if anything very healthy.

Monkey see, monkey do.

Which kain credit freeze dey Naija? These banks just want free money. The pyramid scheme is over. They better find solid businesses to invest in instead of speculating on phony shares when they know all of them are cooking the books.

If interbank lending is strong, there is no need for bailout. What assets do they want to be bailed out anyway? Assets that they made up in the first place? Phantom assets which they cooked just to make their balance sheet look good?

The resistance to the move is said to have been led by some business moguls who stand to lose shareholding in their respective companies to foreign financiers if the share prices go on a freefall.
Many of them had secured foreign loans to expand their businesses, using the value of their shares as collateral but a freefall in price will wipe out the value of the security and pave the way for the foreign financiers to take over their businesses.

ha ha overvalued shares have come to bite them in the ass.

http://www.thisdayonline.com/nview.php?id=125809

bawomolo:

ha ha overvalued shares have come to bit them in the ass.

http://www.thisdayonline.com/nview.php?id=125809

Bamo, thanks for the link.

I don't know how so-called business men do not know how to value shares in companies and assess risk, not just on a micro-level but on a macro-level. Too many fake business men in Nigeria. Here today, gone tomorrow, depending on who is President and who is Governor.

Anyway, the foreigners should come and take the shares jare. Because of these mugu's, we are forfeiting our financial sovereignty.

And why do they set 1% limits on downturn in stock-trading? Is 1% all it takes for these businessmen to catch heart attack? This is the way for the rich and connected to dump their shares whilst maintaining it's value. Sure enough, the stockbrokers are working to dump shares of their rich clients before the market hits it's daily 1 percent limit. A poor man has no chance to dump his shares in such a limited market. In Russia, every time they suspend trading, you see the market come crashing every time trading reopens. This is what will happen when NSE lift restrictions.

All this downturn is simply because NSE is trying to regularise the trading year for all companies. The crooks have been discovered so they decided to dump their shares. The insider's sold their shares first, leaving these uninformed so-called business men to carry the can. Their last hope is bailout, if not them go riot. 

[center][size=16pt]CBN stops banks' bail-out plan [/size][/center]
A PLAN by six banks to inject N100 billion each to increase liquidation in the money and capital market was shot down by the Central Bank of Nigeria (CBN) yesterday.

The CBN said there was nothing to bail out, as all the fundamentals of the country's banking system were right.

However, conflicting signals came from the House of Representatives Committee on Capital Market (them want chop money, what do Politicians know about banking?), which endorsed a proposal that the Federal Government should emulate the United States (US.) and some European nations by offering bail-out funds to Nigerian banks to cushion the effect of the current global financial meltdown.

In fact, the committee proposed a stabilisation fund of about N500 billion.

The developments came on a day that a Senate committee expressed concern over increasing losses at the Stock Market, although the Securities and Exchange Commission (SEC) reiterated that there was no cause for alarm.

The apex bank aborted the bail-out on the grounds that Nigerian banks were recording huge profits; possess the highest capital adequacy ratio of 22 per cent in the region as against the Basel 2 minimum requirement of eight per cent and minimal exposure to the capital market recession of less than eight per cent.

The Nigerian Stock Exchange (NSE) recently said it had appointed United Bank for Africa (UBA), Guaranty Trust Bank (GTB); Union Bank of Nigeria (UBN), Intercontinental Bank and Zenith Bank to inject N600 billion to the market to stabilise it.

Three days later, the capital market regulator (SEC) declared the NSE action null and void. It explained that the NSE had usurped its function since it lacked the mandate to do so and demanded explanation from the body on its action.

In the same light, the CBN yesterday barred the banks from injecting bail-out liquidity. It announced the decision at the end of a special bankers committee's meeting, comprising banks' chief executives.

According to the CBN's Director of Banking Supervision, Mr. Odufu Imala, who briefed reporters at the end of the meeting in Abuja in company of the Managing Directors and Chief Executives of Zenith Bank Plc, Mr. Jim Ovia; Diamond Bank Plc, Mr. Emeka Onwuka and Spring Bank Plc, Mr. Suleiman Ndanusa, the apex bank's investigation indicates that Nigerian banks' exposure to the capital market recession was just eight per cent of their total assets, which was not serious enough to warrant any bail-out plan to them or the capital market.

He insisted that the current share price crash was a corrective mechanism, which is natural and was nothing to panic.

Ofcourse, Nigeria will wanna bailout, more money for the stupid leaders to chop, Na God go punish all of them

Shouldn't the house of reps employ some sort of consultant, financial, engineers, medical blak blah
so they actually look or act like they know what they are talking about
it seem they just spend all day watching CNN eating chicken

the banks are not asking for money but they want to give out money to companies declaring huge profits
like they own it.

ROFLMAO!!!! I love the way the article says the house of senate ENDORSED the bailout nevermind the situation in the banking sector!!! ROFLMAO!!!

ahahahahaha

.

tpia:

they might have collateral tied up in the US markets or elsewhere.

But they do need to explain what the bailout is for.

who has collateral in the US Market, the banks or the govt?
because this is the govt offering a bail out without the bank asking for one.
So the question is who is bailing who, and what are they bailing.

tpia:

they might have collateral tied up in the US markets or elsewhere.

But they do need to explain what the bailout is for.

nigerian companies having collateral tied up in US markets, since when naija companies dey invest for lehman brothers or goldman sachs .

the bailout is just a means to cover their crooked behinds.

@Poster, it is necessary for members of the house and others to get their share of EgunJe 2008 Cake. With EFCC in the house, the need a semi-legit way to get to that money and it seems they have found a way through the global crisis.

They obviously need to bailout the price of their shares, because it's definitely not the banks they are trying to bail out. You can not give medicine to a healthy man.

I believe most of these senators have huge investment in the stock market as do most Nigerians. But they are not thinking of "most Nigerians" when they ENDORSE a bailout. They are thinking of themselves (bank accounts) and their shares.