The decision of the Central Bank of Nigeria (CBN) to re-strain banks from using local funds to finance their off-shore subsidiaries will help in protecting depositors, experts have said.
The former director, Banking Supervision, CBN, Mr Titus Okunronmu, said the apex bank stopped banks against taking such funds abroad for investments to protect depositors.
He said depositors had lost huge funds to the liquidation of banks, arguing that the apex bank does not want a recurrence. He said the ideal thing is for banks to make money where they are operating and not to repatriate funds generated locally to international markets.
The moment Nigerian banks start complying with the corporate governance issues of their host countries, they would survive offshore, he said.
According to him, depositors are crucial to the growth of the industry and any attempt to gamble with their money would have dire consequences.
He said it would amount to uncalculated risks if banks use local funds to finance foreign subsidiaries, stressing that CBN has taken a good decision. He said banks have demonstrated capacity to succeed by taking some proactive measures, adding that such efforts would improve the economy.
Former President, Association of National Accountants of Nigeria (ANAN) Dr Samuel Nzekwe cautioned banks against flouting rules relating to raising funds at the international market.
He said if banks got cheap funds, the tendency to mismanage the cash would be, adding that depositors' fund are cheap money because banks do not pay special interest on them. He advised them to raise money for investments in countries where they operate subsidiaries.
Chief Executive Officer, Dunn Loren Merrifield, Mr Sonnie Ayere, said the CBN directive was to prevent banks from using local funds to fund offshore operations.
"While we cannot blame CBN for warning banks against using the local funds to finance offshore subsidiaries, it is pertinent that the apex bank monitor the banks well to avoid crises," he said.
He added: "What CBN is saying is that banks should CBN raise the money in international markets to finance their subsidiaries. Raising capital is a task in the country. If for instance, bank A or B has taken most of its capital abroad, this implies that the bank must raise fresh capital to make its balance sheets look good. To avoid immediate and future problem, CBN has directly puts a safety valve on depositor's money by issuing the directive."
