Ivory Coast’s financial system is grinding to a halt with banks closing and the stock market suspended, sparking a run on the banks left open as the West African nation’s political crisis drags on.
Standard Chartered Plc, Citigroup Inc. and BNP Paribas SA have all closed their units in the world’s top cocoa producer because of security fears after a disputed Nov. 28 election left the country with two rival administrations.
The Central Bank of West African States has demanded banks in the region halt all transactions with its agencies in Ivory Coast after they were seized by Laurent Gbagbo, the incumbent president. Alassane Ouattara, the internationally recognized winner of the election, has also called on companies to stop paying taxes to Gbagbo’s administration and told coffee and cocoa shippers to halt exports for one month in a bid to starve Gbagbo of funds.
“This is a significant setback for Gbagbo’s administration,” Samir Gadio, a London-based emerging market strategist at Standard Bank Plc, wrote in an e-mailed note yesterday. “The financial system has virtually come to a standstill, which is likely to erode the regime’s base of support going forward, especially if public and private sector salaries are not serviced later this month.”
Gbagbo’s administration will take “judicial proceedings” against the local units of BNP and Citigroup for shutting their local branches, his Justice Ministry said on Feb. 15. That may further alienate global investors after the government defaulted on $2.3 billion of Eurobonds this month.
No Liquidity
Clients formed long lines at the banks that were left open in the commercial capital of Abidjan yesterday.
“We are living in a state of uncertainty,” said Alain Doffou, a 45-year-old high school teacher who waited with about 40 others in line for an automated teller machine in the Plateau neighborhood of Abidjan. “I want to withdraw my money because I prefer keeping my savings with me.”
Abou Traore, a 31-year-old police officer, said he tried to close his account and withdraw all his money at a branch of SGBCI, the unit of France’s Societe Generale SA in Ivory Coast. The lender denied the request, he said, “because it doesn’t have enough liquidity.”
“Given the increasingly challenging operating environment in the Ivory Coast, we have decided to temporarily suspend our operations there until it is safe to reopen,” Shaun Gamble, a London-based spokesman at Standard Chartered, said by e-mail yesterday.
Bond Default
The Bourse Regionale des Valeurs Mobilieres, where companies from eight West African nations trade their shares, was closed “until further notice” following the Feb. 9 seizure of its offices by Gbagbo’s administration, according to a statement issued Feb. 14 in Ouagadougou, Burkina Faso. Gbagbo called the move to halt trading on the market “void,” according to an e-mailed statement yesterday.
The nation failed to make a $29 million interest payment on its Eurobonds on Jan. 31 after a grace period, prompting the London Club group of commercial bank creditors to declare an “event of default” on Feb. 1.
The 2.5 percent note maturing in December 2032, sold in April 2020, fell to a record low of 36.25 cents on the dollar on Feb. 2, according to Bloomberg data.
Economy Contracting
Ivory Coast’s economy, once the second-biggest in West Africa after Nigeria, may contract in the first half of the year as the crisis deepens, Gadio and other Standard Bank researchers said last month. The European Union levied trade and travel sanctions on Gbagbo, his supporters, and institutions that aided his bid to stay in power last month.
At least 296 people have been killed in post-election violence, according to the United Nations. Ouattara remains holed up in the Golf Hotel in Abidjan, where he is protected by UN peacekeepers. Gbagbo retains control over the army, state television and over public institutions.
The UN yesterday authorized the deployment of three more infantry companies and one aviation unit, including three armed helicopters, for its peacekeeping mission in Ivory Coast, according to Deutsche Presse-Agentur.
South African President Jacob Zuma will also visit the country on Feb. 21 as part of attempts by the African Union to resolve the political stalemate, South Africa’s Department of International Affairs and Cooperation said on its website yesterday.
http://www.bloomberg.com/news/2011-02-17/ivory-coast-banks-exchange-close-people-rush-to-withdraw-cash.html
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