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Cablegate: Central Bank of Nigeria Publishes a Second List of Bank

VZCZCXRO4751
PP RUEHMA RUEHPA
DE RUEHUJA #1992/01 3031410
ZNR UUUUU ZZH
P 301410Z OCT 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7366
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2196
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ABUJA 001992

SIPDIS

DEPARTMENT PASS TO USTR FOR AGAMA
TREASURY FOR TONY IERONIMO, ADAM BARCAN, SOLOMON AND RITTERHOFF

E.O. 12598: N/A
TAGS: ECON EFIN ETRD NI
SUBJECT: CENTRAL BANK OF NIGERIA PUBLISHES A SECOND LIST OF BANK
DEBTORS

REFTEL: ABUJA 1845

-------
SUMMARY
-------

1. (SBU) The Central Bank of Nigeria published another list of bad
debtors after its second round of bank audits. Some individuals
have challenged their inclusion and threatened litigation. Some
loans were secured with collateral, and it is not apparent why the
banks failed to dispose of this collateral to offset the
non-performing loans. The GON also owes debtors for contracts
completed, such as power plants in the National Integrated Power
Project and road construction. Debts recovered as a result of the
Economic and Financial Crimes Commission's actions are a small
proportion of the total amount of bad debt. END SUMMARY.

---------------------
PROMINENT INDIVIDUALS
---------------------

2. (SBU) The Central Bank of Nigeria (CBN) published a second list
of bad debtors on October 14 following the completion of its audit
of the remaining ten banks (reftel). The list includes prominent
Nigerian businessmen, companies, and several states. Prominent
entities/persons include: Rockson Engineering, owned by Engineer
Arumemi Johnson; Transnational Corporation (TRANSCORP), a domestic
conglomerate; People's Democratic Party (PDP) Chairman Board of
Trustees Chief Anthony Anenih; former Vice President Atiku Abubakar;
Zenon Oil, owned by business mogul Femi Otedola; prominent
industrialist Aliko Dangote (a repeat from the first list); Global
Fleet, owned by Jimoh Ibrahim; presidential adviser Dr. Wale
Babalakin; Nigerian High Commissioner to South Africa Buba Marwa;
Nigerian Minister of Labor Adetokunbo Kayode; Oodua Investments, a
conglomerate jointly owned by Ogun, Oyo, Osun, Ondo, and Ekiti
States; the Bayelsa State government; prominent political-economist
Professor Pat Utomi; business mogul Mike Adenuga; Chief Cletus
Ibeto; and Sir Emeka Offor.

------------------------------
SOME OF THE DEBTS WERE SECURED
------------------------------

3. (SBU) The list of debtors of recently audited banks such as Wema
Bank and Spring Bank included the collateral posted for the loans.
Collateral included properties in Lagos, Abuja, and Port Harcourt.
Normal banking practice calls for banks to dispose of the collateral
to offset non-performing loans and obtain a court order to wind up
the business of the defaulting customer if the proceeds from asset
disposal are insufficient. It is not apparent why the banks failed
to dispose of the available collateral in these cases.

---------------------------------------
THE GOVERNMENT OWES SOME OF THE DEBTORS
---------------------------------------

4. (SBU) Several debtors are creditors to the GON, which often
delays paying for completed contracts, sometimes for years, which
can cause contractors to default on loans. Debtors falling into
this category include Rockson Engineering, which has almost
completed the power plants financed under the GON's National
Integrated Power Project, and TRANSCORP, whose purchase of the
privatized state telecommunications company NITEL was cancelled but
is still awaiting a refund from the GON.

--------------------------------
DEBTORS LIST IS BEING CHALLENGED
--------------------------------

5. (SBU) Debtors such as former Vice-President Atiku Abubakar
acknowledged their indebtedness and said they are willing to pay
their debts. Others published ads in the local press asserting
their innocence. Future View Securities, Extra Oil Limited, and
Tradjek Nigeria Limited claimed that they neither applied for nor
QTradjek Nigeria Limited claimed that they neither applied for nor
received loans from Bank PHB, and challenged Bank PHB to provide
proof of to the contrary within seven days or face litigation.
Others who have challenged their inclusion in the list are Netlink
Digital Television, Mofas Shipping Line, Brigadier (rtd.) Buba
Marwa, and Professor Pat Utomi. Companies such as Globe Motors
claim that their loans have been restructured and are in compliance,
while others have claimed that their purported indebtedness is a
subject of litigation. The CBN responded by inviting debtors to
challenge it in court.

--------------------------------------------- ------
AMOUNT RECOVERED IS A SMALL PERCENTAGE OF THE TOTAL
--------------------------------------------- ------


ABUJA 00001992 002 OF 002


6. (SBU) The Economic and Financial Crimes Commission (EFCC) has
held press briefings on the amount recovered from debtors since the
"name and shame" strategy began. In October, it announced that it
had recovered about 135 billion naira ($900 million), which is less
ten percent of the non-performing loans. Analysts estimate the
total bad debt is between 1.5 trillion and 3 trillion naira ($10 to
$20 billion).

------------------------------
SOME DEBTORS TO BE RE-INSTATED
------------------------------

7. (SBU) Equitorial Trust Bank non-executive director and business
mogul Mike Adenuga, who was initially sacked from the ETB board by
the CBN, is expected to be back on the bank's board soon. CBN
sources stated that upon further investigation no money laundering
or insider abuse practices were found against him, according to
local press reports. The CBN is discussing with Adenuga the
injection of $150 million of additional capital into the bank.

-------
COMMENT
-------

8. (SBU) CBN actions have been hailed as a tonic to corrupt banking
practices - a clear economic positive in the long run - but in the
short term they contributed to a contraction in credit. Litigation
from alleged errors in the bad debtor lists could prevent banks from
recovering debt, most of which will have to be recovered through a
combination of debt restructuring, collateral sales, and
court-sanctioned winding up of the debtors' businesses.

SANDERS

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