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Banking & Finance - October 21, 2022

Inside CBN’s 50 Billion Sale of Polaris Bank to Capital Investment Limited

The Central Bank of Nigeria and the Asset Management Company of Nigeria (AMCON) have recently announced that the sale of Polaris Bank shares to Strategic Capital Investment (SCIL) has been completed. 

On October 20, 2022, the CBN announced this in a press statement that was posted online. “The Central Bank of Nigeria (CBN) and the AMCON are pleased to announce the completion of a Share Purchase Agreement (SPA) for the acquisition of 100% of the equity in Polaris Bank (‘Polaris’ or ‘the Bank’) by Strategic Capital Investment Limited (‘SCIL’).” It announced.

The apex bank asserted that SCIL had made the advance payment of N50 billion and, by agreeing to the terms, would return the CBN’s consideration bonds in full, totalling N1.305 trillion.

The bank will need to make earnings more than N60 billion in order to repay the debts.

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The delayed confirmation 

After Polaris Bank denied that a transaction was being completed by the apex bank and AMCON, the sale of the bank to Strategic Capital Investment Limited has now been confirmed. Polaris Bank only recently made a statement in August rejecting any transaction and referring to it as “speculative.”

“Our attention has been drawn to an online report on the purported sale of Polaris Bank Limited. This publication is speculative, deliberately intended to create panic and should be disregarded by the banking public.” Polaris.

The most recent confirmation from the central bank calls into question the level of trust placed in the bank’s management, which by downplaying an ongoing transaction, may have led depositors to assume there wouldn’t be a sale.

The NDIC also hinted at a refusal of the bank’s sale by asserting that all Nigerian banks were sound.

“All banks that are operating within the country are sound in as much as their licences have not been revoked. If there is a problem, the regulator that issues the licence will be the one to revoke the licence. In as much as the licence is not revoked, you’re free to continue to bank with the institution; it means it is safe.”

Along with the issue over the rejections, the House of Representatives also ordered the CBN to block the sale of the bank, saying that it must be open and competitive.

“The suspension will subsist until the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), and the Asset Management Corporation of Nigeria (AMCON) have concluded all processes for the open, transparent, and competitive bid process.” 

Consideration of payment 

Since the Central Bank of Nigeria intervened in 2018 to revoke the licence of the former Skye Bank Plc and establish Polaris Bank to take over its assets and some of its liabilities, Polaris has been functioning as a bridge bank.

The CBN added that SCIL paid an upfront sum of N50 billion to purchase 100% of Polaris Bank’s stock and “has accepted the terms of the agreement, which include the full repayment of the sum of N1.305 trillion being the consideration bonds injected. 

The CBN thus received an immediate return for the value it has created in Polaris Bank during the stabilisation period, as well as ensuring that all funds originally provided to support the intervention are recovered.”

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