Minority’s perceptive on resolving the liquidity, recapitalization challenges of NIB   

“RESOLVING THE LIQUIDITY AND RECAPITALISATION CHALLENGES OF NIB, OUR NATION’S PRIDE – THE MINORITY’S PERSPECTIVE”.

Good morning to you, Hon colleagues, Distinguised ladies and Gentlemen of the media, and invited guests present.

We have invited you here for this press briefing to share with the people of Ghana ,through you, our alternative perspectives on how to RESOLVE THE LIQUIDITY AND RECAPITALISATION CHALLENGES OF NIB BANK FOR GHANA TO COMPLY WITH THE IMF EXTENDED CREDIT FACILITY(EFC) PROGRAM FOR A STRONG FINANCIAL SECTOR.

Ladies and Gentlemen, I guess we all still remember that between 2017 and 2018, the government of Ghana, acting through the Bank of Ghana, embarked on what it termed the Banking Sector Clean up.

It is trite knowledge that this action resulted in the revocation of licenses of many universal banks and a host of Deposit-taking financial institutions disappearing because of the methods chosen by the governor and his team.

They relied on regulatory provisions of the Banks and specialized deposit-taking institutions Act, 2016 (Act 930), which became operational in April 2017.

The revocation methods used were chaotic and were characterized by high-handedness, fraught with predatory regulatory actions, political biases and were riddled with technical flaws.

The authorities preferred to use overly expensive options rather than the obviously known least cost approaches and preservation regulation methods that proved successful in jurisdictions such as China, Canada, Europe, America and elsewhere.

It was, therefore, not surprising that the financial sector, after enduring the incompetent policies of the new government, left gaping holes and fragilities in the banking sector.

By the end of the exercise, a whopping Gh25 billion had been spent to collapse over 400 financial institutions, leaving in its wake the killing of confidence in the financial sector with a collapse of several of it’s layers and value chain institutions such as savings and loans companies, finance houses, rural and community banks and micro- finance institutions.

Panic withdrawals resulting from the run on financial institutions left most of them with recapitalisation proceeds inadequate to strengthen these banks.

The essence of the failed banking sector clean- up was to emancipate the indigenous banks and financial institutions with a huge dose of regulatory forbearance to keep several non-compliant financial institutions afloat, especially NIB owned by Government that continued to operate from a very deep- hole.

Ladies and Gentlemen, it is instructive to note that every viable and constructive alternative proposals by well- meaning Ghanaians aimed at resolving the problems of NIB to retain and revive a largely systemic Bank were bluntly ignored.

NIB’s biggest problem is that it is suffering from capitalization deficit of GHC2.4 billion.

However, a casual review of NIB’s balance sheet shows that a restructuring of the balance sheet can generate in excess of GHC2.75 billion to wipe of the GHC2.4 billion and leave a free shareholders fund and equity of about GHS350 million towards recapitalization and a total cash injection of GH2.8b. It is therefore puzzling that anybody sitting on this gold mine will attempt to give it out to somebody for peanut.

I wish to state here, that some of the proposals that were ignored are still very important today to remedy the situation.

These include but are not limited to the following:

1. Sale of NIB’s 24% shares in Nestle Ghana acquired at Ghc50 million a long time ago, that were given a conservative value of Ghc500million in 2018.This singular proposal would have generated a risk-free cash of Ghc500million to NIB and provided a realized capital gain of Ghc450 million for ecapitalisation. Strangely, this was either ignored or lost on Hon. Ken Ofori Atta, who rather opted to take the shares in Nestle and swap it with a Ghc500 million government bond plus a further Ghc800million government debt as deposit for shares. As it turned out, those bonds have since been impaired through the poor conduct of the Finance Minister in the infamous and unending DDEP consistent with IFRS 9.

ATTACHED IS THE FULL STATEMENT

NIB statement-1