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Banks fail to account for Nigeria’s $7bn reserves

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There are strong indications that a huge chunk of the $7bn reserves which the Central Bank of Nigeria under a former Governor Charles Soludo gave to 14 banks had yet to be repaid 13 years after it was collected.

The CBN had in 2006 apportioned $7bn out of the nation’s external reserves, which stood at $38.07bn then to 14 global asset managers and their 14 Nigerian banks local partners, to manage.

The amount given to the asset managers represented about 18.39 per cent of the total external reserves, which was hitherto kept with foreign banks.

The 14 global asset managers and their local counterparts were Black Rock and Union Bank of Nigeria Plc; J.P. Morgan Chase and Zenith Bank Plc; H.S.B.C and First Bank of Nigeria Plc; BNP Paribas and Intercontinental Bank Plc; UBS and United Bank for Africa Plc; Credit Suisse and IBTC Chartered Bank Plc.

Others were Morgan Stanley and Guaranty Trust Bank Plc; Fortis and Bank PHB Plc; Investec and Fidelity Bank Plc; ABN Amro and Access Bank Plc; Cominvest and Oceanic Bank Plc; ING and Ecobank Plc; Bank of New York and Stanbic Bank Plc; and Crown Agents and Diamond Bank Plc.

The CBN gave each asset manager $500m of the external reserves to manage.

Sources in the banking industry confided in our correspondent that the global financial crisis of 2008 and the capital market meltdown of 2009 affected some of the banks.

It was gathered that some of the banks took the fund and in a bid to boost profitability invested massively in capital market instruments through margin loans.

The drive to remain bullish amidst threat of economic meltdown also propelled some of the banks to channel funds to oil marketers for petroleum products importation without due diligence.

A former Managing Director of a Deposit Money Bank who spoke to our correspondent in confidence said the global financial crisis of 2008 dealt a heavy blow on the balance sheets of many of the banks.

He said some of the banks that collected the $7bn reserves to manage on behalf of the country never recovered from the crisis, a situation that made repayment difficult.

Some of the banks that were taken over by the apex bank after the stress test of 2009 were Oceanic Bank, Intercontinental Bank Plc, Platinum Habib Bank, FinBank, Afribank, Union Bank Plc.

Out of these banks, three of them namely Bank PHB, Oceanic Bank and Intercontinental Bank benefitted from the management of the $7bn reserves.

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