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Wednesday, August 19, 2009

Nigeria threatens largest debtors

Governor Lamido Sanusi
Governor Sanusi has pledged to clean up the financial system

The Nigerian central bank has threatened legal action against defaulting customers of five banks rescued in a $2.6bn (£1.58bn) bailout.

The central bank published a list of more than 200 customers, including companies and state governments.

Nigerian police have arrested four of the banks' chief executives after all five were sacked last week.

The bosses are being questioned over the bad loans taken on by their banks which totalled $7.6bn.

The regulator has argued that weak governance left the banks so undercapitalised that they posed a threat to the banking system in Nigeria.

The five banks concerned are Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank.


The published list includes corporations like Transcorp and fuel distributor African Petroleum, as well as the Ministry of Finance and Economic Planning and state governments of Delta and Ebonyi.

Femi Babafemi, a spokesman for Nigeria's Economic and Financial Crimes Commission, said the chairman of the commission has met with the chief executives of all of the country's banks.

"We've made a recovery in a particular case of well over 5bn naira ($31.5m)" Mr Babafemi told the BBC.

"At the same time, we also have to work along with other regulatory agencies to ensure that sanity and discipline get rooted in our financial institutions. "

The BBC's Ahmed Idris in Abuja says the list includes some of Nigeria's most well-connected and richest men who have loans "that are looking increasingly toxic".

Billionaire tycoon Aliko Dangote, who was listed at the world's richest African by Forbes magazine last year, has a loan worth $15m with Oceanic Bank, the central bank said.

Mr Dangote was recently unanimously elected president of the Nigeria Stock Exchange.

His companies control trade in many of Nigeria's commodities, including rice, salt and sugar, textiles and vegetable oil.

New governor

"It has become necessary to use this medium to request the following defaulting customers of the affected banks to pay without further delay their indebtedness, failing which the banks will take all appropriate legal actions to ensure repayment," the central bank said in a statement.

Governor Lamido Sanusi last week bailed out and took over the five banks, saying the banks were undercapitalised and posed a risk to the entire banking system.

Mr Sanusi took over as head of the central bank over two months ago, pledging to clean up the banking system that has fuelled growth in Nigeria.

The unprecedented action against the banks has sent the Nigerian currency, the naira, lower but also raised hopes that the Nigerian financial system may finally be reformed.

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