Investment Market Trembles As Buhari Signs BOFIA 2020

With the signing of the Banking and Other Financial Institutions Act (BOFIA) (amendment) Bill 2020, the reality of a tougher regulatory regime is unnerving the banking sector, investigation by The Guardian revealed at the weekend.

Industry sources said the contentious sections of the bill, which had earlier pitched the Nigerian Economic Summit Group (NESG) against the leadership of the Central Bank of Nigeria (CBN), were extremely worrisome. A top banker told The Guardian “those issues were as worrisome to directors of banks as they were when NESG raised the alarm on them.”

The NESG had written to President Muhammadu Buhari, urging him to withhold his assent on the bill, as many of its clauses make the document not “fit for purpose in a developing country.”

The group and other stakeholders pointed out different clauses, which they said should have been expunged or rephrased. One of the sections highlighted was 12 (6), which reads in part: “No restorative action or like order howsoever described, shall be granted against the Bank (CBN) or the governor in any action, suit or proceedings in relations to the revocation of licence by the Bank under this Bill, and the remedy of any claimant or applicant against the Bank or the governor in any such action, suit or proceedings is limited to monetary compensation not exceeding the equivalent of the paid-up capital of the bank at the time of the revocation of its license.”

There is also a clause on license application and approval, which the CBN governor is not obliged to give reasons for turning down an application. NESG said the clauses and other similar ones were open to abuse.

The position of the organisation on the bill, which was meant to repeal the 29-year-old law on banking regulation, placed it against the leadership of the apex bank, resulting in an implosion as three bank chiefs resigned their directorship of the economic think-tank in solidarity with the regulator.

YESTERDAY, the CEO of NESG, Laoye Jaiyeola, told The Guardian he would wait to read the copy signed by the President before he would make further comment.

Whereas the relevant stakeholders admitted they were yet to see the copy signed by the President, they noted that the version transmitted by the Senate, which The Guardian sighted, would not be different from the final document as there was no record that the President returned it to the National Assembly.

An industry source said it was most unfortunate the President went ahead to “endorse illegality, despite the uproar it generated”, adding that it would send a terrible signal to the international investment company about Nigeria. The source said there could be dumping of bank shares in the coming months as “any bank can lose its license on the slightest excuse without the chance of regaining it.

The source said the bank directors who would be affected “would murmur in silence as nobody wants to be seen as confronting the Central Bank.” He said there was, however, a growing concern among the most “loyal executives and directors that some banks could have been targeted by the new law.”

“It may not be true, because I don’t see how a law would be passed just to eliminate one or two organisations. If it is true, however, it means we are finished as a country,” the source said, adding that banks might not want to directly challenge the Act in court, but could do so by proxy.

Godwin Owoh, an advisor to Charles Soludo when he was Governor of the apex bank, said the Act would rob Nigeria of the Savannah Bank experience. Savannah was in the court for seven years before its license revocation, which when later discovered to have been done in error, was reversed.

Owoh, a professor of Applied Economics (banking and finance), said the new BOFIA flies in the face of the country’s aspiration for increased corporate governance practice and the Company and Allied Matters Act (2020) while wrongly ascribing infallibility to managers of the regulatory body.

Owoh, who said his presentation and those of others at the Senate’s public hearing on the bill were ignored, frowned at the Act for being “overtly and unnecessarily personalised.” He wondered why the law gave so much power to the CBN without balancing same.

The economist dismissed the provision for a special tribunal for enforcement and recovery of eligible loans, saying it is a duplication of the responsibilities of the Asset Management Corporation of Nigeria, the Economic and Financial Crimes Commission (EFCC), the Nigeria Police Force and the Judiciary.

The Act is not only generous to the governor, the newly created special tribunal, which some stakeholders have described as overkill, also enjoys similar largesse. A clause in the version seen by The Guardian says: “the President of the tribunal, members of the tribunal or any person acting judicially shall not be liable to be sued in any court for any act done or ordered to be done by him in the discharge of his judicial duty whether or not within the limits of the tribunal’s jurisdiction.”

But Victor Ogiemwonyi, a retired investment banker, said the amended Act is aimed at limiting endless litigation, which many banks, including Savannah, were involved in.

However, a lawyer and presidential aspirant on All Grassroots Alliance (AGA) in the 2019 elections, Chuks Nwachukwu, said the contentious section 12(6) of the Act is a direct limitation of the power of the court as granted by the Constitution. This, he said, has rendered the Act null and void. He said no law ousting the jurisdiction of the judiciary could be validated.

Nwachukwu, who was involved in the 2009 bank intervention litigations, added: “This is another measure to cow Nigerians. It is a law made against Nigerians. What they are simply telling the banks is that, no matter how huge you are, they can withdraw their licenses at the slightest excuse. That will instill fear in all businessmen. It will scare investments away. We did not have this sort of draconian law in 2009 when the Central Bank took over some banks. You can imagine what will happen now that the CBN is not answerable to anybody, not even the court. This is an attack on investors; it is an attack on the country.”

Observing that the law is ousting the jurisdiction of the court, the lawyer expressed worry about the wrong signal the Act would send to the investment market, saying it would drag the country back to the military era.

Other lawyers, including Femi Falana (SAN), were reached for comments on the legality, or otherwise, of a clause that seeks to restrict the court in dispensing justice or stopping an aggrieved party from seeking restorative order. Many of them, including Falana, said they needed time to study the new Act.

Managing Director, Highcap Securities, David Adonri, said the market would not accept the amended Act, which he described as anti-investment. He said it would end like the Police Act 2020, which the court nullified. He said shareholders, depositors and other interest groups would challenge it in court if banks would not stand the intimidation of the CBN.

Acting Director, Corporate Communications Department of the CBN, Mr. Osita Nwanisobi, did not pick calls or respond to SMS on the bank’s position on implementation of the Act.

– The Guardian