Re: Is Sanusi really a reformer or an undertaker of Nigerian banks? Credit mismanagement + Regulatory mishandling = Credibility crisis By NETA NWOSU, The SUN Wednesday, September 16, 2009 •Sanusi Photo: THE SUN PUBLISHING More Stories on This Section Mallam Sanusi Lamido’s trip to London in the aftermath of his putsch of the top managements of the five banks was an admission that there was an imminent crisis of confidence. It was an indication that his celebrated sanitization has stirred suspicion overseas and unwittingly, a problem of credibility for our financial system. The CBN Governor embarked on the trip, now fondly dubbed the London Road Show by the local media, with his fellow Kings College old boy banker now turned his ‘Man Friday’, who gleefully seized the occasion to thoroughly whip former Governor Chukwuma Soludo. It was a sweet opportunity for him to take his pound of flesh from the erstwhile stubborn Governor who, inspite of his protestations, compelled Nigerian banks including his own investment bank, to either recapitalize to what then looked like an impossible amount of N25billion or merge with others to hit the required mark. A policy that forced him to cede the managing directorship of the bank he founded and manored until his South African investors diluted his grip. At the London outing, Sanusi tried profusely to make his audience believe that Nigerian banks are credible and safe while our economy is doing well; yet his action preceding the visit demonstrates the contrary. Like one banker said, “how can you be telling the world that your banks are safe, but just the other day you noisily sacked five Chief Executives of some of your biggest banks. The people will just snigger at you as not being serious. Meanwhile the Governor’s friend and companion on the trip, rather than address the issue at stake, preferred to denigrate the former CBN Governor” There is this strong view that Sanusi would have done what he did without raising the kind of alarm and engaging in theatricals that have gotten the international financial community raising their eye brows. Inspite of his public relations trip to London, we now have an avoidable situation where foreign banks are rejecting our letters of credit. The implication of this is that our import dependent economy would now begin to experience delays in importation of raw materials and finished goods. This loss of confidence in our financial system and consequent delays in importation, according to Mazi Sam Ohuabunwa, Managing Director, Neimeth International Pharmaceuticals, could lead to high prices of imported items including petroleum products. At the beginning of this crisis, the CBN Governor told us that apart from gross credit mismanagement by these banks Chief Executives, that they were also allegedly implicated in large scale fraud and money laundry which the EFCC has investigated and has since commenced prosecution. The question many are asking now is, if these are the real crimes, couldn’t they have been discreetly charge without the unnecessary sensation that has been brought to bear on the whole exercise? Credit mismanagement or breach of credit guidelines and loan defaults could have been more prudently handled by the regulatory authorities and law enforcement agencies without advertising to the whole world how imprudent our market is. Those who hold this view claim that the only reason Sanusi acted differently is just to rubbish his predecessor’s work and create an image of a messiah so that he would be able to direct a predetermined script. The haste with which Sanusi sacked the five Managing Directors and rushed to publish the list of purported loan defaulters is rather curious. After the examiners audit exercise and CBN’s interview with the five Chief Executives, the popular opinion is that the sacked Chief Executives would have been given copies of the audit report to enable them defend themselves. But rather than give them the benefit of responding to the issues raised, the CBN Governor hurriedly sent them packing, claiming that he acted within his authority. Yet those who understand the law insist that he acted in flagrant violation of section 34 of CBN Act 2007 which states that CBN does not have the power to wind up, sell banks, hold shares of banks and cannot take over a public quoted company. The act also states that CBN “shall not engage in trade or otherwise have any interest in commercial, agricultural or industrial undertaking, except as provided in section 27 to 32… or in any other undertaking, except such interest which the bank may in any way acquire in the satisfaction of debt due to it, and provided that all such interests so acquired shall be disposed of at the earliest suitable time”. They argue that the law forbids CBN to buy shares of any banking institution except it is approved by the Federal Government for the purpose of promoting the development of the money or capital market. Governor Sanusi’s activities and his utterances, these experts say, have been in clear breach of this sections of the act. They point out that even if these banks were terminally ill and faced with the option of closing shop that it is the statutory responsibility of NDIC to take them over. And even at that there are prescribed lawful steps it must follow in winding up the banks. The list of supposed loan defaulters is another case in point. Some of these purported defaulters have since disputed and debunked the claims with facts as in the case of Jimoh Ibrahim’s Global Fleet who took front pages of a few major national newspapers to state their financial transactions with their banks and how well the company’s loans have been performing. So far, we are yet to hear anything in the contrary from the CBN. This goes to show that the apex bank did not do its home work in the first place. So what was the hurry about? On some of the debtors list we also saw a situation where the debt of a company was (mischievously or in error) credited to one rich man on the board, perhaps believing that he would underwrite it out of fear for EFCC, but the man raised an alarm and asked his lawyers to quickly repudiate it on the pages of newspaper. Since the debt list was made public some of those involved have continued to challenge the figures publicly through their lawyers and those who could not afford to attract undue publicity to themselves have quietly gone to their banks to take them up on the figures apportioned to them. It must also be stressed here, like Jimoh Ibrahim once pointed out, that it is not a crime to take a loan or owe a bank in so far as the facility is being serviced according to the terms of the agreement. It must also be emphasized on the other hand that it is not a crime for banks to give loans as long as it is done responsibly in compliance with the laid down credit guidelines and not done fraudulently. And this is the area many Nigerians say Sanusi should have addressed with the seriousness and sobriety that it deserves and not with the antics of a Lagos show boy (shakara). Much as the unusual strategy of publishing debtors list seems to be working, judging from the billions of naira being turned in, we must also not overlook the fact that it infringes on the rights of sincere and forthright customers to their privacy in their banking transactions. The publication constitutes an unhealthy exposure to these kinds of customers. This is Nigeria and this kind of publication could later elicit the kinds of repercussions that the initiators never intended for these banks customers. Now that Sanusi has sacked the banks top management and injected N420 billion into these financial institutions as convertible loans, an investigative report in Vanguard newspaper front page has revealed yet again that the these banks do not require more than N100 billion and they gave the break down of how the N100 billion has been utilised by the five banks. So how did Sanusi and his colleagues come about the N420 billion they put into these banks? Industry watchers say this is another mistake arising from his stampede to get rid of these Chief Executives and take over their banks, nothing more. The Vanguard report went further to state that even the N100 billion utilised by these bank “were precipitated by the undue pressure on the banks following the CBN action of August 14”. The report stated that the N100billion used so far has indeed stabilized the banks and that what the bailed out banks are currently doing is to use the fund to play in the interbank market where banks lend to one another. According to the report which quoted some bankers, “the N100 billion which the banks have used is also the same amount the CBN used to print the N420 billion bail-out fund. Banking insiders are of the view that the true situation of the banks were blown out of proportion by the CBN to prepare the ground for the take-over of the affected banks”. Even though I’m one of those who laugh at the insinuations that Sanusi Lamido has a northern agenda but the unfolding scenarios are such that you cannot but begin to take some of these accusations seriously. Bankers spoken to have repeatedly said that before Sanusi came, some of these banks already have issues with liquidity and this was well managed through the Expanded Discount Window (EDW) created by Chukwuma Soludo. Through the EDW these banks were able to service their liquidity needs without sending the wrong signal to the outside world and thereby panicking our trading partners. But when Sanusi, a credit risk expert, came he concluded that the banks frequent visits to the Discount Window was a sign of liquidity anaemia. So, rather than continue to gradually give them blood tonic through the EDW till they’ve fully recovered, he opted to give them pints of full blood transfusion by way of N420 billion which, from available report, now appears to be an overdose. With the Discount Window under Soludo, these banks were accessing credits according to their needs and MARKETINGmatters reliably gathered that the former Governor had indeed given them till December this year to put their accounts in order or face his plan ‘B’ which may not be palatable to them. And in response, these banks have started making efforts to put their houses in order before Sanusi wielded the axe. Bankers say the Governor merely gave a dog a bad name to hang it. This further reinforces the prediction of Vanguard March edition that Soludo’s tenure would not be renewed after it expired because the north felt marginalized under reforms. That the northern candidate that will take over from him will proscribe five banks and will cause their managements to be taken over. Even though Sanusi and CBN operatives have repeatedly denied this, the Governor’s actions and comments tend to steadily gravitate in the direction of these predictions. Ever since Sanusi sacked the management of these five banks he’s been talking about selling, selling, selling. You then begin to wonder if his job as CBN Governor is to auction banks that were painstakingly built from scratch by local promoters and their shareholders or to help rehabilitate them. And to crown it all, he is not looking for local buyers. He has his eyes set on foreigners who up till now have reportedly spurned his offer on the ground that the whole exercise is either too controversial or that they should be given more time to consider the offer. Come to think of it; who wouldn’t be wary of a junta-like dispensation. If these foreign buyers come from countries where things are done properly, they would know that you don’t just auction off a bank like some old cooking utensils except something is fishy somewhere. By the way, why is Sanusi obsessed with selling Nigerian banks to foreigners? The answer may well lie in the talk about a northern agenda. Those who insist he’s acting a script posit that it is a ploy to pass on these banks to supposed foreign investors fronting for corrupt Nigerian politicians. This way they would be able to repatriate the money they stole from the national treasury and buy these banks through their foreign hatchet men masquerading as investors. It was reported the other day that there was disagreement in the CBN hierarchy over whether to release or not to release the audited reports of the remaining banks. Why should there be a disagreement? Afterall the Governor released that of the five banks with minimal consultation with his team. As the Executive Governor he should go ahead and release the report of the remaining banks. Anything short of it would amount to ‘partiality’ like we say. What is good for the goose is also good for the gander. Nigerians are waiting. Sanusi’s utterances on Islamic banking not minding that this is a multi religious country and that religious zealotry has ignited a chain of mayhems that claimed innocent lives, give him away as a man on a mission of vengeance of sort. Should a religious bank be his priority now or to stabilize and strengthen the industry that has been traumatize by his brash measures. Is the Governor pretending not to know that an Islamic bank would come with its own peculiar obligations, sanctions and discriminations? We have to be careful. The late Fela Anikulapo-Kuti sang: “When trouble sleep, iyanga go wake am. Wetin him dey find… Palaver him go get!
Posted on: Thu, 13 Mar 2014 06:20:31 +0000
Trending Topics
Recently Viewed Topics
© 2015