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Recapitalisation: ICAN urges CBN to include bank’s retained earnings
The Institute of Chartered Accountants of Nigeria has called on the Central Bank of Nigeria to reconsider its exclusion of retained earnings as part of the capital base of banks.
This was disclosed in its position paper on the new capital requirement for banks signed by its president, Innocent Okwousa, published in national dailies on Monday.
According to the CBN, only the share capital and share premium items on the shareholder fund portion of the balance sheet will be recognised in this particular round of recapitalisation.
To meet the requirement, the CBN gave the banking sector three options including issuance of new common shares (by way of public offer, rights issues, or private placements), mergers and acquisitions and the upgrade /downgrade of their respective license category or authorisation.
ICAN welcomed the recapitalisation exercise as a development that would strengthen the country’s financial system.
“It has been long overdue as the last major recapitalisation of banks was done in 2005. Because of the naira devaluation following the unification of exchange rates, the new calibrated minimum capital requirements seem appropriate,” ICAN stated.
However, the accounting body expressed the stance that retained earnings form part of the equity of a bank and are core tier 1 capital.
“Although CBN has acknowledged this fact, excluding retained earnings runs contrary to this acknowledgement. While we acknowledge the authority of the CBN to regulate the banking sector, there is a need for it to further clarify the exclusion of retained earnings for bank recapitalisation, given Nigeria’s adoption of the International Financial Reporting Standard and the Basel Accord. This is so because Nigeria has not announced any carve out in Its IFRS adoption,” the CBN noted.
Making recommendations, ICAN asked that “the CBN may consider allowing the inclusion of retained earnings on the condition that they are not impaired by losses, to make it easier for the banks to comply with the new capitalisation policy
“The two years allowed are considered sufficient to implement the programme. However, given the young age of non-interest banks in Nigeria, they should be allowed a longer period, probably three years, to meet the minimum capital requirements.”
The Institute also urged the CBN to extend the 30-day period it gave banks to come up with an implementation plan to 60 days, given that it would take some time to obtain the consent of shareholders.
Other suggestions proffered by the institute include the provision of tax incentives.
“It is also important that the CBN provides some incentives to banks to facilitate the recapitalisation exercise, as was done in 2005.
“This can take the form of tax incentives and ensure that the overall cost of recapitalisation is low by seeking the cooperation of relevant stakeholder institutions such as the Federal Inland Revenue Service, the Securities and Exchange Commission, the Nigerian Exchange and the Federal Competition and Consumer Protection Commission, given that banks have the option of raising funds through the capital market or mergers and acquisitions.
“The CBN should adequately supervise the banks to ensure that the costs of recapitalisation are not transferred to their customers by way of higher bank charges. The CBN is advised to engage the Bankers Committee on measures to put in place to ensure adequate compensation to the staff of banks that may be disengaged as a result of the recapitalisation exercise.
“Exercise due verification to ensure that corrupt and laundered money do not find their way into the capitalisation,” ICAN highlighted in its position paper.
It also offered to partner with the CBN and banks in the implementation of the capitalisation exercise.
News
Stop using repressive laws to intimidate journalists – SERAP, NGE tell FG
The Socio-Economic Rights and Accountability Project, SERAP, and Nigeria Guild of Editors, NGE, have called on Nigerian authorities at all levels of government to stop using repressive and anti-media laws to target, intimidate and harass journalists, critics and media houses.
The groups made the demand after an interactive session on ‘the state of press freedom in Nigeria’ held at the Radisson Blu Hotel in Ikeja.
In a joint statement, SERAP and NGE said that, “the government of President Bola Tinubu, the country’s 36 governors and FCT minister must now genuinely uphold press freedom, ensure access to information to all Nigerians, obey court judgments, and respect the rule of law”.
They expressed concerns about the escalating crackdown on the right to freedom of expression and media freedom and the flagrant disregard for the rule of law by authorities at all levels of government.
The groups note that the suppression of the press in recent times takes various forms ranging from extrajudicial to unlawful detentions, disappearances, malicious prosecutions and wrongful use of both legislation and law enforcement.
The statement read in part: “We would continue to speak truth to power and to hold authorities to account for their constitutional and international obligations including on freedom of expression and media freedom.
“Nigeria as a country has a long and unpleasant history of press gagging and clampdown on media freedom, which is evidence of extensive state censorship of media and in some cases, the utter control of state-owned media houses.
“This position has not changed considerably despite almost 25 years of unbroken democratic rule in the Fourth Republic.”
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FG adds 625MW to national grid – Minister
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Tax: Court orders FCT-IRS agency to seal off defaulting coys
A Magistrate Court sitting in Wuse Zone 2, Abuja, on Friday, ordered the Federal Capital Territory Internal Revenue Service (FCT-IRS) to seal off a company, Ifedi A.K. Nigeria Ltd, over allegations bordering on non-filing of annual returns.
The Magistrate, Janada Balami, gave the order after lawyer to FCT-IRS, Michael Towolawi, moved the application to the effect.
Towolawi told the court that the company had failed to file its annual returns from 2019 to 2023 in breach of Section 81 of the Personal Income Tax Act, LFN, 2004, and amended in 2011.
He said all efforts to make the company comply with the law proved abortive.
The lawyer, therefore, applied that the company be compel to appear before the court to explain why it acted in breach of the law.
Balami, who held that the application by the agency against the company had merit, accordingly granted same to seal the No 6, Rudolph Close, Off Katsina-Ala Street, Maitama, Abuja.
She, consequently, ordered the company, the sole defendant in the matter, to appear before the court on May 16.
The Director, Legal Services of the FCT-IRS, Festus Tsavar, told journalists after the proceeding that the service would move against companies that do not file their annual returns as provided by law.
“You know that we have a new minister in FCT that is doing a lot of projects and that hinges on money.
“And of course, you are aware that FCT has come out of TSA.
“So it is the internally generated revenue that will make the government of FCT to be able to do those projects completely within required time,” he said.
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