A couple of months ago during a chat with with an attorney friend of mine, I expressed my reservations over the cozy and unhealthy relationship between the then Central Bank of Nigeria Governor, Professor Charles Soludo and some commercial bank Chief Executives.
I saw the relationship as unethical and capable of compromising the regulatory duties of the apex bank. During his tenure at the helm of the regulator bank, there were several speculations about the frail state of the banking sector in the country, but the goverrnor at several instances debunked the claims, and instead was full of praises for the banks and their superfly CEOs. Today we know the true state of ten local banks, five of them are at this time under intensive care on life support. What I find most intriguing is that nobody from the apex bank came out to warn investors or depositors secretly or otherwise, that there were serious problems in the banking sector.
Where were the so-called financial analysts and the business desk reporters when things were falling apart? When did journalism become only reproducing press releases and statements? Whatever happened to investigative journalism? Sad to note that during Prof. Soludo’s reign, the Chief Executives were king. They got away with a lot of unethical practices. I recall that in 2007, Zenith Bank reneged on paying dividends to common stock holders and no regulator sanctioned the bank for it.
The new CBN Chief, Mr. Sanusi Lamido Aminu Sanusi, until his appointment last month was himself a Chief Executive of one of Nigeria’s oldest banks, First Bank. Those who know him, say he is a no- nonsense professional to the core. I gather his peers and a couple of interests lobbied against his appointment, because he was seen as someone who could upset the status quo, instead they pushed for Prof. Soludo’s tenure extension.
Looks like the new Czar is actually what they say he is. In an interview he granted the FT of London just after his appointment, he hinted on the audit report, that has today gunned down five bank Chief Executives so far. Will there be more casualties when the special examination is concluded in September? Which CEO’s will be the last men standing? How did these banks get into trouble anyway?
The boom in the country’s Capital Market and the successful public offers during the last consolidation exercise, left the banks with loads of cash in their vaults. This unfortunately became the waterloo of these affected banks. Their Chief Executives obviously got carried away making out loans recklessly without proper risk assessment, management and corporate governance.
Most of the loans made to their cronies were either invested in the Capital Markets, Oil and Gas or channelled towards funding extravagantly expensive lifestyles. Hence when the global recession came knocking, the value of the investments in stocks and energy nose dived and the banks were left with a huge hole in their vaults, as borrowers were neither able to finance their loans nor payback the principal loans. These loans have since been declared as non performing or bad loans.
Written by Austyn Oganah @ www.huhuonline.com