Chinwendu Obienyi
Nigerians have been reacting to the Central Bank of Nigeria (CBN) directive, that banks that fail to meet the minimum capital adequacy ratio should not be allowed to pay dividends.
According to the CBN statement from CBN said “Banks or discount houses that have a high composite risk rating of high or Non- Performing Loan (NPL) ratio of above 10 per cent shall not be allowed to pay dividends and Deposit Money Banks (DMBs) and Discount Houses that meet the minimum capital adequacy ratio but have a CRR of “Above Average” or an NPL ratio of more than 5 per cent but less than 10 per cent shall have dividend payout ratio of not more than 30 per cent”
Reacting to the development, some shareholders labeled the policy as a sadistic approach by CBN, urging the bank to review the policy.
Speaking to Daily Sun, President, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, argued that the directive from CBN will send the wrong signal to investors who invested in bank stocks.
“The directive is not a regulation, CBN should not make it as a policy because all of us know that even if the bank have a good capital, there is no way they can pay dividend. Payment of dividend is instituted by the board.
You can make the profit and decide not to pay dividend but when the company makes profit, it is their duty to pay dividend because that is why investors are investing in bank stocks. If the banks are strong, why do you then stop them from paying dividend?
“What CBN has done is not good because that will send the wrong signal to investors to stop buying bank stocks. So if the banks have a stronger share capital base and a lot of them due to oil exposure made a lot of unwholesome provisions over the years as these banks are recovering from recession. If they have recovered then they should pay dividend”, he said.
Corroborating, Co-Founder, Nigeria Shareholders Solidarity Association (NSSA), Alhaji Gbadebo Olatokunbo, labeled the policy as a sadistic approach to returns on investments in the banking industry. He stressed that the Central Bank directive must be done effectively.
He however noted that the management/directors of the banks should be held liable if they do not pay dividend.
“Inasmuch as this is a sadistic policy on returns on investment the CBN has a job to do and it must be done effectively, Therefore we will have to hold the managements/directors of our banks liable, if they are unable to pay dividend.
“I am also of the opinion that any bank that failed the test of CBN on Dividend-Payment should not pay emoluments to their directors while the management should lose their bonuses/welfare and be responsible for the payment of any sanction from the CBN forthwith”, Gbadebo said.