AN EXAMINATION OF THE LEGAL IMPLICATIONS OF MORTGAGES AS COLLATERAL IN NIGERIA

AN EXAMINATION OF THE LEGAL IMPLICATIONS OF MORTGAGES AS COLLATERAL IN NIGERIA

.GENERAL INTRODUCTION

The 2005 consolidation exercise otherwise known as the recapitalization exercise

embarked upon by the Central Bank of Nigeria (CBN), was meant to address the issue

of inadequate share capital of banks in Nigeria by the introduction of N25Billion

minimum share capital for all Banks in the country in order to make the banks

stronger to be able to finance more businesses. The concept of recapitalization refers

to the policy that compelled all commercial banks to raise their capital base from

N2billion to N25billion by the Central Bank of Nigeria on or before 31st December,

20051. The exercise brought about huge resources at the disposal of financial

institutions which in turn enabled them to make credit available to a large number of

individuals and corporate entities with the intention of making huge profits.

The desire to make huge profits consequently pushed the financial institutions into

fierce competition as a result of which some of them started giving out loans without

collaterals in a bid to lure customers with the ultimate aim of making huge profits.

This culminated in billions of naira loans to the capital market which at the end of the

day, got caught up in the financial meltdown (a situation were some financial

institutions or assets suddenly lose a large part of their value especially in the stock

market crashes). The melt down led to the near collapse of many banks/other financial

Institutions as a result of bad debts which arose from credit facilities granted by

financial institutions without adequate collateral.

Consequently, some few Nigerian banks mainly due to the general weakness in their

Risk Management and Corporate Governance framework, started displaying signs of

failure as far as October 2008 due to huge concentrations of their exposure to certain sectors of the economy like the Capital Market and the Oil and Gas Industry. These

banks started showing serious liquidity strain and had to be given financial support

by the CBN in the form of an “Expanded Discount Window” (EDW)2 when the CBN

extended credit facilities to these banks on the basis of collateral in the form of

Commercial Paper and Bankers Acceptance. This clearly indicated that

recapitalization alone, was not the panacea to the problem of the banking industry in

Nigeria as all the banks frequenting the EDW, had recapitalized and even raised

additional capital thereafter.

TOPIC: AN EXAMINATION OF THE LEGAL IMPLICATIONS OF MORTGAGES AS COLLATERAL IN NIGERIA

Chapters: 1 - 5
Delivery: Email

Number of Pages: 70

Price: 3000 NGN

In Stock

Buy the Complete Material Now