Between Ijeoma Nwogwugwu and Lamido Sanusi

Sanusi assured her that the removal of any bank’s board and its management would not in any way solve the systemic problems in the banking sector, and that the CBN’s immediate concern was on how to institute measures that would ensure that the banks are healthy.

Between Ijeoma Nwogwugwu and Lamido Sanusi by Daniel Elombah

Ijeoma Nwogwugwu; the analytical thinker behind ‘behind the figures’, must be biting her lips in regret for being a mature, cautious economist rather than a headline grabber, unlike Lamido Sanusi.

On Tuesday, August 4, 2009, she had in her possession a copy of a document titled “CBN Audit Report” that would have been a great scoop for THISDAY.

It was the draft of a report, purportedly put together by the Central Bank of Nigeria (CBN) into its findings on the soundness of 10 commercial banks in the country for which an industry-wide audit embarked on by the reserve bank had been concluded.

According to her informers, following the audit undertaken by CBN examiners in some of the 10 banks, their findings had shown that some of the banks were insolvent, and therefore the  boards and management of the affected banks are going to be sacked.

Mindful of the far-reaching implications of what she had read and rather than rushing to Press, Ijeoma decided to verify the authenticity of the story. She called the CEO’s of the affected banks and then called Sanusi, the CBN Governor who was then at Nairobi.

According to her, Sanusi was extremely alarmed, to put it mildly. He patiently refuted the story. Sanusi informed her said that the primary concern of the CBN is the soundness and safety of financial institutions in the country. The CBN, he continued, had not taken any decision whatsoever on the audit exercise of the 10 banks since its audit for 14 other banks had not been concluded.

According to Sanusi, the removal of any bank’s board and its management would not in any way solve the systemic problems in the banking sector, and that the CBN’s immediate concern was on how to institute measures that would ensure that the banks are healthy and can meet minimum capital and liquidity ratio requirements to perform their primary role of intermediation at interest rates that do no emasculate the lending public.

But lo and behold, on Friday, August 14, 2009, The Central Bank of Nigeria removed the CEO’s and executive directors of Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Finbank Plc and Afribank Plc.

The CEOs that have been sacked by the CBN are Erastus Akingbola (Intercontinental Bank); Okey Nwosu (Finbank); Sebastian Adigwe (Afribank); Mrs Cecelia Ibru (Oceanic Bank); and Bartholomew Ebong (Union Bank).

My gut reaction upon learning of this earth-shaking typhoon Sanusi was a sense of euphoria.

Who is not angry at what these execu-thieves have done to Nigerian Banks? Many poor people lost their investments in some of these Banks. We are angry that these rich men are paying themselves a huge amount of money, and living in luxury, while ordinary people are made unemployed, destitute and homeless. This is a crime. All the Bank bosses and their debtors should be jailed, I enthused.

Like Sabella Abide – who yearned for military coup d’état to completely eliminate the oligarchy, “these class of people: the degenerates, the soulless thieves, and the money doublers, loan sharks and loan defaulters and their collaborators who have been steadily bleeding Nigeria, sucking her marrow” – I wanted to vent my anger and frustration on these crooks.

On reflection however, it is important to separate the multifaceted actions taken this week by Sanusi and analyse each on its merit rather than lumping them together. In this way, we could analyse his actions clear-eyed and devoid of emotion:

Sanusi’s actions were threefold; Firstly, sacking of the Bank executives, releasing what CBN’s examiners unravelled following the audit exercise; secondly, releasing the names of Billionaire debtors that brought down the 5 Nigerian Banks and the details of their account, and: thirdly, handing them over to the EFCC  for arrest and possible prosecution.

Critics have focused their criticism of Sanusi’s action on; 1. Releasing of the names of the debtors and details of their accounts was a violation of banker/customer confidentiality; 2. The CBN has failed to point out exactly what the crimes of the Banks and its Executives that were sacked are and; 3. Whether the CBN in sacking the bank executives acted ultra vires their powers.

In my article, Sanusi vs. Bank Crooks: Bank secrecy my foot! I explained why on all three counts, Sanusi’s action was on safe grounds.

I pointed out that while Bank secrecy is a hallowed legal principle under which banks are allowed to protect personal information about their customers.

However, these are not normal times. It is worthy of note that Bank secrecy was invented by the 1934 Swiss Banking Act but yesterday,  Switzerland agreed to reveal the names of about 4,450 wealthy American clients of UBS AG to U.S. authorities in a tax dispute settlement that pierces Swiss banking secrecy and now threatens to spill over to other banks.

Desperate times demand desperate measures. If even the Swiss abandon irresponsible bank secrecy, we can’t be holier than the pope!

The CBN has compelled a series of disclosure, which is within its full responsibility.

On the crimes have the Bank bosses committed; The CBN’s intervention is a devastating response to management recklessness, accounting opaqueness, and an attempt to reassure depositors with a bailout to avoid a systemic failure.

Before this time, the events that led to the Central Bank of Nigeria wielding the big stick have been traced to years of consistent manipulation in the banking sector.

The banks are guilty of dirty business deals, short-sighted investments and lack of respect for basic banking procedures. The axed five banks were involved in Annual Reports padding, illegal fees, unsecured loans and exceeding laid down rules on servicing single obligor.

Therefore the CBN should be forthright and accuse the banks of false accounting, fraud, and other illegalities, rather than basing its actions on bad management of non-performing loans.

However, Nigerians and Sanusi’s critics seem to ignore another salient point that calls Sanusi’s action into question, a glaring point which a careful analyst could glean from Ijeoma Nwogwugwu article. (This article is no longer on THISDAY online but you can still read it here)

In analysing why sacking the bank executives is implausible. The bank executives she contacted all dismissed the allegation and wondered why the CBN would rush to take such a decision when it had not concluded its industry-wide audit for the 24 banks in the country.

Per Ijeoma: “Of greater significance was the fact that all the affected institutions had met with CBN’s auditors and complied with their instructions on the level of provisioning for classified assets on their books.

One particular CEO was emphatic that the reserve bank cannot on the basis of CBN auditors’ findings remove the board and management of his bank when it had not even had time to assess the findings of the audit report, except its (CBN) officials were working to an answer.

Another CEO stressed that it would be uncharacteristic for the CBN to remove the boards and management of financial institutions without meeting them and informing them of the infractions they had committed, be it under the Banks and Other Financial Institutions Act (BOFIA) or the CBN Act.

The rule of thumb is that they must be informed and are always instructed to rectify the infractions (including recapitalising the banks, where necessary), failing which the CBN can decide to impose whatever sanctions it deems necessary”.

Even Sanusi Lamido agreed that “the removal of any bank’s board and its management would not in any way solve the systemic problems in the banking sector, and that the CBN’s immediate concern was on how to institute measures that would ensure that the banks are healthy and can meet minimum capital and liquidity ratio requirements to perform their primary role of intermediation at interest rates that do no emasculate the lending public”.

Seeing that the CBN has only audited the accounts of ten banks while the audit for 14 other banks had not been concluded, my question to Sanusi is: what changed between August 4, 2009 and August 14, 2009 to warrant the summersault we have just witnessed?

Was he merely lying to Ijeoma or was there a sinister motive behind this financial kamikaze that have destroyed the confidence built up by the era of consolidation, complicated matters and may very well bring the economy to its knees?

Based on the above, Ijeoma chose not to believe her sources that of the 10 banks for which CBN had concluded its audit; it was preparing to sanction four banks by removing their boards and management. Specifically, she was informed that “they had it on good authority from their contacts in the CBN that the executive management starting from Assistant General Manager cadre up to the board level of these four banks was going to be forced out by the CBN”.

Like the bank CEOs she had spoken to earlier, Sanusi made it clear to her that the primary concern of the CBN is the soundness and safety of financial institutions in the country. Thus the impact of a pre-emptive sacking of the bank executives is worrying. She was rightly “flabbergasted by the impact such a development could have on the financial services sector”.

Today, the naira weakened against the U.S. dollar even after the Central Bank of Nigeria (CBN) injected N400 billion into five troubled banks and dismissed their chief executives. Meanwhile, VANGUARD says foreign bankers have discontinued honouring letters of credit from their Nigerian counterparts, owing to the recent sacking of the management of five Nigerian banks by the Central Bank of Nigeria over issues bordering on poor corporate governance and a debilitating debt profile.

Reports have it that the management of Rockson Engineering Company Limited, manufacturers handling production of equipment handling ongoing power projects had stopped work as a result of the CBN action.

Since the CBN action was taken, no foreign correspondent bank was willing to honour letters of credit from their Nigerian counterpart banks anymore ‘the confidence built up by the era of consolidation has been frittered away over-night”.

 Some manufacturers have even put off a factory acceptance test for a company whose people were scheduled to attend abroad. According to the Vanguard, they were simply told not to come.

Where no local bank will agree to honour CBN letters of credit anymore, you can imagine what this will do to the ongoing power projects. Some are saying it is either the CBN governor wasn’t properly briefed or he is being misled.

When she first got the report of the impending action by the CBN, and having spoken to the relevant parties concerned, Ijeoma Nwogwugwu desire to break a story and pontificate on what she thought was a world-class exclusive was blunted unlike the Guardian that went ahead and published the story.

Ijeoma’s informers must be laughing their head off at her naiveté in dismissing their “CBN Audit Report” as “based on unsubstantiated claims, innuendo and rumours” bankers “suffering from an advanced case of persecution complex”. She dismissed them as compromised officials of the CBN conjuring up conspiracy theories on the basis of false information and said their report “smacks of desperation that must be removed from circulation”, indirectly indicting Guardian for going ahead with the story.

Aside these facts, I have a nagging feeling – I sincerely hope I’m wrong- that this hasty sacking of the directors of the five banks smacks of vendetta. Why?

On Sunday, June 28, 2009, LEADERSHIP Newspapers published a piece that was largely ignored by the media.

They reported that Since President Umaru Musa Yar’Adua named Malam Sanusi Lamido Sanusi governor of the Central Bank of Nigeria (CBN) there has been some disquiet in the top hierarchy of some banks.

The banks involved are those whose CEOs raised a whopping N2.5billion slush fund in their desperate attempt to stop Sanusi, then one of their colleagues, from becoming CBN governor.

The managing directors, led by “a Delta State-born Igbo-speaking boss of a first generation bank that is also one of the biggest banks in Africa”, and four other bank MDs were said to have raised the slush fund which was managed and shared by a leader of the PDP who currently holds the chairmanship of a plum parastatal.

This leader, who is a former friend of President Olusegun Obasanjo but now estranged from him, is highly respected by President Yar’Adua dutifully, shared the money among top PDP men who are believed to be influential enough to prevail on President Yar’Adua to change his mind on Sanusi.

All his efforts, together with the pressure from the suborned PDP chieftains, made no impact on the president who had long made up his mind about who to appoint CBN governor.

LEADERSHIP went on that now that Sanusi has settled down to his job, the current desperation among the bank MDs is to ensure that their N2.5billion is covered up effectively forever.

While Nigerians are generally happy that action are being taken to clear the rot in the banking sector, yet based on all the above, some are asking: Why would Sanusi rush to take action against 5 banks when the auditing of the remaining 14 banks is still ongoing? Is Sanusi Lamido Sanusi on a vendetta against this “Delta State-born Igbo-speaking boss” and her cohorts for leading the campaign against his candidacy as the CBN Governor? Was Sanusi properly briefed on the effect his action would have on investor’s confidence on our economy and its banking system? Finally, was due process followed in sacking the bank bosses?