National Democratic Congress (NDC) minority legislators in parliament on the Finance Committee have provided alternative perspectives on how to resolve the liquidity and Recapitalization Challenges of NIB Bank for Ghana to Comply With the IMF Extended CREDIT Facility(EFC) Program for a strong Financial Sector.
According to them(minority)the exercise that was undertaken between 2017 and 2018, by the government of Ghana, acting through the Bank of Ghana, on what it termed the Banking Sector Clean up 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.
Ranking Member on the Committee Issac Adongo who led a presser held Thursday, September,28,2023, at parliament, stated that 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.
“NIB’s biggest problem is that it is suffering from a 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 off 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.” He lamented
Adongo alleged that the government in conjunction with BOG interns merged NIB and ADB, a move that is drastically dangerous to the country.
“An analysis of the risk-adjusted capital of ADB per the rules of Base II and III shows that ADB has capital adequacy issues akin to Asthma. As for NIB, its problem is well documented, and for the purpose of this illustration, let’s call it diabetes.
The wisdom of Ken Ofori-Atta and Governor Addison is that asthma and diabetes be added together to produce a healthy child.
Who does that?” He questioned
He hence outlined SOME PROPOSED SOLUTIONS By the minority
1. Restructure NIB Balance Sheet.
The government should restructure the balance sheet of NIB to swap all NIB debts on its balance sheet owed to the government to equity to release it from the excessive debt burden owed to its owner, the Government.
This includes the following;
a. Government debts in bonds totaling Ghc1.3 billion should be converted to equity to immediately increase the capital of NIB by that amount.
b. Following that, NIB’s 24% shares in Nestle Ghana, which were swapped for the Ghc 500 million, should be returned to NIB since the value in the new NIB shares issuance would be a consideration for the underlying debts.
c. The Nestle Shares should be valued and sold to free up the cash equivalent to increase the liquidity of NIB.
d. The sale of the NIB shares in Nestle to be returned would lead to a realized capital gain of about a million. Coupled with the debt Swap of Ghc1.3 billion, the two actions will inject a realized equity of Ghc1.750 billion and cash increases of about Ghc500 million.
Source: Mary Quartey
Parliamentary Correspondent
