Enter Sanusi Lamido Sanusi: the bulldozer

A tidal wave just hit the banking sector. At the stroke of the pen, the career trajectory of top management executives of five banks took a southward curve. Yesterday’s decision by the Central Bank of Nigeria to sack the managing directors/chief executives as well as the executive directors of five banks was aimed at saving the banks from collapse, because their balance sheets had shrunken, their shareholders’ funds impaired and they had liquidity problems.

Background to the crisis

President Umaru Musa Yar’Adua, worried by the reports he was getting that there was a deep-seated crisis in the banking sector, called former CBN governor, Prof. Chukwuma Soludo, to a meeting early this year. The president wanted to get a clear picture of the situation on the ground.
Soludo assured him that there was no cause for alarm. Whatever appeared to be a crisis, he said, was not significant enough to upset the balance. He said instead of Nigerian banks needing a bail-out, it was in fact the banks that were in a position to bail out the economy, especially the public sector which had been hard hit by falling oil revenues.
Unconvinced, Yar’Adua decided to work on a Plan B – that is, forgo the idea of nominating Soludo for a second five-year term as CBN governor. His argument, according to sources, was that if anything adverse happened to the banking sector, it could bring down the Nigerian economy.
After doing a few checks and studying a few resumes, the President settled for Mr. Sanusi Lamido Sanusi, a risk management expert and Group Managing Director (GMD) of First Bank of Nigeria Plc. He gave him a clear mandate: “Go and clean up the system.”
On assuming office two months ago, Sanusi, who was already conversant with the banking sector and had smelt fumes of distress in some players in the sector, sent examiners to the banks to know their true state of health. It turned out that at least four banks were permanently on life support through the expanded discount window which was created by Soludo for banks to address their liquidity problems.
Sanusi decided to close the expanded window – but left the guaranteed interbank market open as an elixir for the banks. Again, he discovered that the same patients came for help and were placed on admission at the interbank “hospital”. On this basis, he chose to act swiftly because, as he would explain later, the threat of an epidemic was in the air.
First, he wrote to Yar’Adua to inform him of the reports of the fitness test conducted on 10 of the 24 banks. (The remaining 14 are still being audited), then fe sought audience with the President.
Last Thursday, Sanusi met with the President till late in the night, where all the issues and measures to be taken were tabled. Satisfied that Sanusi was acting within the laws – the CBN Act as well as the Banks and Other Financial Institutions Act (BOFIA) – Yar’Adua left the meeting at 10 p.m. and told Sanusi and his team to perfect their plans.
The team swung into action, meeting till 4 a.m. yesterday morning while Yar’Adua left for Saudi Arabia where is he currently performing the lesser hajj and undergoing medical check-up.
At 9 a.m. yesterday, the CBN board met, ahead of the special meeting of the Bankers’ Committee which was to have in attendance the bank CEOs and their chairmen. At 10.30 a.m., the meeting with the bank executives started.
Sanusi spoke in general terms about the key findings contained in the reports of the examiners, especially as they related to bad loans, mismanagement and unethical practices.
The meeting ended at noon and the CEOs and chairmen of the 10 banks that had been examined were told to stay back, while the other 14 left the premises of the CBN.
For the five banks that passed the fitness test, they were each given letters by the CBN governor, detailing the findings as they relate to those banks. Each bank was told what to do about the findings, which were not too critical to the health of those banks – namely First Bank of Nigeria Plc, United Bank for Africa Plc, GTBank Plc, Diamond Bank Plc and Sterling Bank Plc. They were told how to make amends.
Then the bombshell. The five banks that were found not to be fit – Intercontinental, FinBank, Oceanic, Afribank and Union – were the last to leave. Each bank’s CEO and chairman were invited to Sanusi’s office one by one and the governor delivered the news and the decision to remove the executives to them in person.
As this was happening, four plain clothes security agents had been posted to the executive floor of the headquarters of each of the affected bank, with a detachment of mobile policemen guarding the premises to protect the banks’ properties as well as prevent them from carting away sensitive documents.
With the exception of Erastus Akingbola, the CEO of Intercontinental, every CEO was in attendance. Shocked, they went back to their offices, briefed their staff and left for good. One of the CEOs was said to have broken down in tears on getting back to the office.
Shock, disbelief, trauma… any word would do.

Sources; ThisDay