ADB not strong enough to takeover NIB – Banking expert

Banking expert, Dr. Richmond Atuahene, has warned against government’s plan to allow a takeover of the National Investment Bank (NIB) by the Agricultural Development Bank (ADB).

According to him, the move could result in a disaster as the current state of the ADB needs recapitalisation while it does not have a strong position to takeover the state-owned NIB.

“If you look at the strength of both banks, ADB is not very strong to be able to take over NIB. In a merger or takeover, we expect at least one of the parties to strong in terms of capital and other resources but none of the two banks is in a good position at the moment,” Dr Atuahene is quoted by Graphic Business.

“ADB is not a strong bank that anybody should recommend such mergers. This will create another problem. If the two come together, the single entity must have a stronger base in terms of capital and everything but if we bring them together in their current states and we don’t take care, it could make the two worse off,” he explained.

The banking expert further added that ADB falls among one of the hardest hit banks which took significant losses from government’s Domestic Debt Exchange Programme (DDEP) to record GH¢371.2 million in the 2022 financial year.

He, therefore, wants government to provide the needed capital injection into ADB before a takeover of NIB can be considered and implemented.

“If government can resource ADB such that the merger will be straight forward, so be it, but if they merge at the current state, it could be a disaster,” Dr Atuahene cautioned.

NIB’s viability

In July this year, Bank of Ghana Governor, Dr Ernest Addison said talks were in place between government and other relevant stakeholders to assess NIB’s viability.

Addressing journalists at the 113th MPC press briefing on July 24, the BoG Governor said issues regarding NIB and other under-capitalised institutions now form part of a financial sector strategy under Ghana’s current IMF-supported programme.

“The NIB is one of the banks that we will make that assessment on, to ascertain whether it is still viable or not. If it is viable and the government can find money to recapitalise it, then Yes. But if it is not viable, then, obviously, we will have to find a different use for that instrument,” Dr Addison earlier said.

“These are ongoing discussions between us and the international partners and I believe that in the next year [2024] or so, we will get a clearer sense of how to handle those particular institutions that are very weak,” he added.

Under Ghana’s 17th IMF programme, the Central Bank has committed to addressing the insolvency of under-capitalised institutions including the NIB.

The move also forms part of efforts to tackle the long-standing under-capitalisation of several special deposit-taking institutions (SDIs) following the banking sector clean-up exercise.

Following the recapitalisation of some banks operating in the country in the wake of the banking sector clean-up exercise, state-owned National Investment Bank, which was on the brink of insolvency, did not undergo recapitalisation.

MA/NOQ

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