It is 10:15 pm on Friday 31st March, and I just picked up my laptop to write this blog. I had been lazy all week but now must submit an article else I would not complete the required three blogs for this week. I just came off a two-hour student-led tutorial on data analysis, I am sleepy and want very much to be in bed, but the urgency of my situation prevails.
Last week was my first intensive week. I had not had so much bookwork to do in years as I had that week. We all managed to pull through. Immediately I got back to Abuja, I spent barely an hour with my family and drifted off to sleep. Most of that Sunday was spent asleep. By Monday, I was lucky to still have three days of work leave left. So, I stayed at home. However, I had a delayed office document on a work process due in just four days – the day I was to resume work. I worked on it lazily, annoyed that I am spending a work leave working. Halfway through it all, I stopped working altogether. I loafed around all day, then all three days. No reading and no work. I just attended the Wednesday lecture. In the end, I felt guilty, yet my time could not be recovered.
Management Communication was to be the lecture on Tuesday, but it did not hold because we had covered what was scheduled for that time in our previous class. The joy expressed in our WhatsApp group was profound. People were very glad they could get an extra lecture day off. We all had not recovered from our first intensive week. I was relieved too – I had extra hours of loafing.
On Wednesday, the Corporate Financial Accounting Class was held. Prof. Ojiabo had us proffering solutions to the Union Bank Case. The bank had a problem with its Owners’ Equity Account: retained losses of 230 billion Naira had pushed the total equity to negative 115 billion Naira. The balance sheet as of 31st December 2010 indicated that the company had 1 trillion Naira in assets with liabilities to the tune of 1.1 trillion Naira. The Central Bank required banks to keep a paid-up share capital of at least 25 billion Naira. The Union Bank’s Management, therefore, needed to come up with a solution to this share capital wipeout or lose its operating license. And we were the management of the bank.
I did not know what the bank should do, and I was too lazy to even do a simple internet search to ask what a company could do in such situations. I managed to study the balance sheet to understand the numbers… “Raise capital.” One student said. “How?” Mr. Ojiabo asked. “Private placement of shares will help.” Another student suggested. “To Whom should the placement be offered?” Mr Ojiabo asked. “High Networth Individuals.” Someone chipped in. Gradually, we came to a solution:
- Approach existing creditors to convert the debts we owe to shares in our private placement offer. These creditors should be chiefly big depositors. Since these big depositors will lose their money if the bank failed, it is in their best interest to buy the private placement shares. These big depositors are not protected by the deposit insurance policy.
- This private placement share offer is made possible through capital reduction for existing shareholders.
I must say, I am not sure I properly represent the solutions we arrived at in class. It was a steep learning curve. I wrote in my notebook that I should read about capital reduction and private placement (I never did). Mr. Ojiabo also hinted that the asset structure of the company was bad: ‘loans and advances’ should come first, ahead of ‘investment securities’ with regards to contribution to total assets (I do not know why). He also mentioned discussions with the big depositors about controlling withdrawals to “stem the tide of deposit bleeding”. I need to find time to read the text on financial statements and to have a discussion with Mr. Ojiabo. I hope I create the time soon.
Meanwhile, tomorrow, April Fool’s Day, I have Corporate Financial Accounting, Data Analysis, and Management Communication classes. I have not done my Data Analysis assignment, nor have I practiced any of the probability theorems taught. Maybe I can catch up early in the morning or during my lunch break. At the same time, my wife feels completely abandoned. I should make it up to her with some hours on Saturday or Sunday nights.
