BusinessDay... the voice of business: Experts, stakeholders flay N/Assembly’s bid to stop banks from raising funds from capital market

Experts, stakeholders flay N/Assembly’s bid to stop banks from raising funds
from capital market
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ABDUL IMOYO & MADUKA NWEKE on 07 January, 2008 03:00:00
 
The House of Representatives had consistently opposed banks’ second attempt to
raise funds from the capital market after the banking consolidation in 2005.
Specifically, the house committee on capital market led by Ahmed Wadada had
earlier indicated its willingness to stop the banks from sourcing fresh funds
from the market through legislation unless they (banks) provide evidence to show
how they have spent such funds in the past.
However, prominent Nigerians, who spoke to Business Day, gave various reasons
why banks should be at ease to come to the market to raise fresh funds.
Theodore Ezeobi, a Senior Advocate of Nigeria (SAN), says the banks have only
the regulatory bodies to take orders from as to coming to the capital market to
raise fresh funds.
According to him, inasmuch as the laws that gave the regulation to the banks to
raise funds are not yet repealed or amended, the National Assembly has little or
nothing to do with regards to banks raising fresh funds from the capital market.
He says it behoves the banks to comply with the rules stipulated and then meet
the conditions set by the regulatory bodies, which include Central Bank of
Nigeria CBN and Securities and Exchange Commission (SEC). He notes that the
function of the committee on capital market in the National Assembly is to
supervise the activities of the banks for them to follow the rules to the
letter.
"The regulation of banks coming to the market to raise funds does not lie with
the National Assembly. The banks are required to get approval from the CBN and
SEC and also comply with the rules guiding that. The moment they meet the
provisions set for that purpose, they have the approval to do so," he said.
Lanre Oloyi, head of media, SEC notes that the banks are guided by the
commission’s rule on issuance of shares to the public.
He says every company has different reasons for raising funds from the market
and such efforts must be in compliance with the rules.
"Once they have met the requirements and the purpose for raising such funds is
stated in a prospectus, it is now left for investors to make their choices. The
commission’s role is to ensure that investors are properly guided even as
companies are expected to comply with the rules on capital raising. We are very
strict on investor protection in the market and any company that fails to play
by the rules will be sanctioned."
Sunny Nwosu, national co-ordinator, Independent Shareholders Association of
Nigeria (ISAN), says the National Assembly does not have the powers to stop the
banks from raising funds from the capital market.
He said: "They are indirectly saying that Nigerians don’t have a right to
invest in companies or banks of their choice. Let the banks keep coming and
Nigerian would decide which of the share offerings they want to invest in."
According to him, the level of subscription recorded by any public offer is a
confirmation of investors’ acceptance of the issuing bank.
It would be recalled that Ganiyu Solomon, chairman, senate committee on capital
market, had said that banks should account for the funds they had raised in the
past, adding that some banks which came to raise funds in the past, albeit,
unsuccessfully were yet to return money to those who subscribed to their shares.
Faruk Umar, president, National Trustees of Shareholders, said the banks had
the backing of the law to come to the market to raise funds. Umar said the
National Assembly should not kick against the bank’s repeated coming to the
market for funds.
"If the Legislature wants to stop them, they should enact fresh laws to that
effect. We have to be careful not to discourage foreign investors. The whole
nation supports it because it affords Nigerians the privilege of being part
owners of banks, which ordinarily they should not be part of," he said.
Another shareholders’ association leader, Mukbtar Mukbtar, said the National
Assembly "has no power to stop the banks."
According to him, it amounts to discouraging investors whose investments in the
banks help to deepen the market.
Mukbtar said: Raising funds is an extension of the industry consolidation
introduced by Central Bank of Nigeria, so should be encouraged. "It is a nice
thing that banks raise their capacity building to be able to meet industry
competitive demands. For the banks to grow they need some money and they cannot
get the money if they fail to allow Nigerians come in. Remember, three banks in
Nigeria are not as big as one bank in South Africa."
He said building their financial base would enable them pay dividends and give
bonuses to shareholders.
The only way to build such funds would be by inviting both local and foreign
investors to buy into it.
Taiwo Oderinde says the action of the legislators is to caution and regulate
the excesses of the banks.
"It is not that they could stop the banks from going to raise fresh funds.
There is no other way by which banks could empower themselves financially other
than through the capital market.
So what is the aim behind stopping them?" he queried.
However, Effiong D Bob, chairman, senate committee on finance, says the banks
consistent coming to the market to raise funds is bothering a lot of people.
Although, the National Assembly has not opened discussion and having final
decision on the issue, the banks are visiting the capital market very often. "I
wonder whether they are really banks, otherwise why should they be constant at
raising funds?