Shareholders kick against N24.98bn deductions from Banks

• accuse CBN of insensitivity to investors’ interest

By Odunewu Segun

Shareholders of banks in the country have kicked against deductions made by the Central Bank of Nigeria from banks’ cumulative profit after tax into the Export Stimulation Fund with the CBN.

According to National Daily findings, a whopping N24.98 billion was withdrawn from the profits of 14 banks quoted on the Nigerian Stock Exchange, NSE, and transferred to the account.

Four of Nigeria’s five tier-1 banks, Zenith Bank Plc, Guaranty Trust Bank Plc, Access Bank Plc and United Bank for Africa Plc, UBA, accounted for most of the N24.98bn transferred to the Central Bank of Nigeria Export Stimulation Fund, National Daily has gathered.

The four banks contributed a whopping N20.3bn or 81.2 per cent, while Banks like First Bank (FBN Holdings Plc), Diamond Bank Plc, Fidelity Bank Plc, Sterling Bank Union Bank of Nigeria Plc, Jaiz Bank Plc, Stanbic IBTC Holdings Plc, FCMB Holdings Plc and Unity Bank Plc contributed the rest due to lesser profits.

Guaranty Trust Bank accounted for N6.6 billion of the total payment, followed by Zenith Bank with N6.5 billion, while UBA, Access Bank and Stanbic IBTC Holdings Plc pooled N3.6 billion, N3.57 billion and N1.43 billion respectively into the Fund.

FCMB Group Plc contributed N717 million; FBN Holdings Plc surrendered N612 million; Fidelity Bank, N487 million; Sterling Bank, N258 million; Wema Bank, N130 million; Unity Bank, N109 million; Union Bank, N77 million and Jaiz Bank, which contributed N155, 000.00.

According to the shareholders, the deduction undermined their interests in the banks, since it amounts to a significant reduction in the banks’ distributable profit.

They advised the CBN to look at alternative means of supporting the non-oil export businesses instead of creating holes in banks’ vaults that would result in erosion of shareholders’ value.

Mr Patrick Ajudua, National Chairman, New Dimension Shareholders Association, NDSA, and Eric Akinduro, Chairman, Ibadan Zone Shareholders Association, told National Daily that the directive betrays CBN’s insensitivity to investors’ interest.

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“What we are saying is that supporting export business is a good concept, but forcing banks to deduct five per cent of their distributable profit will short-change us in terms of our dividend and return-on-investment.”

Commenting, Akinduro argued that the action is disincentive to investment in the capital market and urged the CBN to withdraw the policy.

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“When you look at other markets like the bond market, recently, the Federal Government introduced savings bond for minority investors and that bond is tax free. So, when you are taking 10 per cent withholding tax from shareholders and still come back to take five per cent from the net of the profit, definitely they are not encouraging people to go into the capital market.”

Recall that the CBN, had in June 2016, launched a N500 billion non-oil Export Stimulation Fund (ESF) to provide concessionary finance to non-oil exporters; provide long-term fund at single digit interest rates to non-oil exporters and aid non-oil export productivity.

The apex bank had directed all Deposit Money Banks (DMBs) in the country to contribute five per cent of their annual Profit After Tax to the Fund.

The Fund to be domiciled in the CBN is to be used as equity stakes in agri-businesses and for other sectors that would make a success of the import-substitution programme of the federal government.