The shocking story of how laissez faire and weak banking regulation of the former governor of Nigeria’s Central Bank, Chukwuma Soludo and the extravagant, casino banking of the Bank executives ruined the Nigeria Banking System, destroyed families and people’s investment and left Sanusi Lamido Sanusi to clear the rot continues.
The Guity Parties By by Dayo Coker
Name and Shame and Barrister Jimoh Ibrahim
The CBN’s decision to release the name of debtors led to several strongly-worded advertisements in the newspapers. Most of the accused debtors argued that their accounts were performing and noted that they even had credit balances in other accounts. This is an untenable argument. After all, African Petroleum had credit balances with Access Bank and that didn’t stop it from being in the hock. Chief O.B. Lulu Briggs, whose wife Seinye Briggs was mysteriously missing from the list of detained Intercontinental Bank directors, claimed that he was not indebted to Union Bank because the loans were taken before he joined the company. I wonder if he would have said the same thing if the company had been sitting on huge cash reserves and the directors tried to prevent him from earning a dividend after he joined the board.
But Barrister Jimoh Ibrahim, the Harvard-trained lawyer provided most of the entertainment. Like his rivals Aliko Dangote and Femi Otedola, Jimoh Ibrahim was named in the CBN’s ignominious list of debtors. Although the three of them quickly disputed the CBN’s figures, it was the clownish Ibrahim who tried to turn a serious matter into a Broadway play. While Otedola and Dangote made moves to repay their debts, Ibrahim went to the press and announced that he would pay three billion and settle the remainder after the account had been audited. For years, he had cultivated the image of a black Donald Trump and was desperately trying to salvage his reputation. According to him, Oceanic Bank had initially waived some of the money and the CBN’s figures were dubious. He also could not resist taking a pot shot at his rivals. Some people had their debts reduced by computer errors, he cackled.
He later commissioned an advertisement where he listed Nigeria’s 24 banks and claimed that he was only indebted to Wema Bank and Oceanic Bank. It was almost hilarious. Jimoh Ibrahim is not indebted to GTBank.Jimoh Ibrahim is not indebted to Zenith Bank. And so on. But it turns out that Jimoh Ibrahim actually owes far more than the 8 billion naira he bandied in the press. It is only in Nigeria that a businessman who takes a loan of 14 billion and makes a public show of repaying 3 billion is treated like an all-conquering hero.
The strange case of Brunel engineering
The management of Brunel Engineering and Consulting Limited placed an advertisement in some of Nigeria’s leading newspapers to counter the CBN’s assertion that it owed a tidy sum of N6, 935,006,115.89 to Afribank. The company stated: The true state of affairs is that Brunel is currently executing the 105 Health Centre Project worth 19 billion naira for the Rivers State Government. Afribank Nigeria Plc, in partnership with Brunel for the execution of the project, has extended a revolving line of 6.25 billion towards the construction of the health centres guaranteed by an irrevocable payment order issued by the Rivers State Government in favour of Afribank. To date, the Rivers State Government has paid the equivalent of three billion four hundred million naira into Brunel’s account with Afribank as part payment for units completed. The 105 Health Centre project is still ongoing. Attached are some of the instruments of deposit. Against this background, Brunel cannot be said to have a non-performing loan with Afribank Nigeria Plc as claimed by the Central Bank of Nigeria.
Brunel then went on to display two Afribank cheques, a deposit slip and the Rivers State Ministry of Health logo. However, a closer look at the documents raises serious questions since the cheques are made payable to Brunnel not Brunel. Is this a case of Evan(s) Enwerem style forgery?
The bonfire of the vanities
Greed drives the global financial services sector. The world’s moneymen, from the boiler room hucksters to the patrician Swiss private bankers, are motivated by fat bonuses and the sybaritic lifestyle that comes with being a successful shylock. So they are quick to devise ways of using mathematics and esoteric legal tools to extract gold from mundane instruments. The root of the current meltdown lies in the rapid growth of this so-called financial innovation industry. As more bankers got rich from repackaging everyday instruments as financial products, they created a quadrillion dollar bubble that would ultimately burst when the market became overheated.
The case of Nigeria was slightly different. After President Olusegun Obasanjo sold his soul to the devious Bretton Woods puppet masters and installed their disciples in key ministerial posts, smart foreign-based Nigerian investment bankers saw a great opportunity to become the lords of Nigeria’s new financial landscape. It was true that they were gainfully employed by big corporations and had imposing titles. But in reality, Vice-Presidents were a dime a dozen and many of them were trapped in cubicles fighting for limited openings with blue-eyed graduates of Ivy League schools. It would take time to crack the glass ceiling. So Osaze Osifo and company left their jobs and returned to the country of their birth.
They were pleased with what they saw. The mortgage sector was almost non-existent and insurance salesmen couldn’t even manage to convince salaried employees to take out policies. There were no credit derivatives and no structured investment vehicles. The Nigerian financial system was still light years behind that of the developed world and as a result of the rural-urban drift, some rustic folk had never been inside the four walls of a bank. But there was a stock market and even though it was still rudimentary, it presented that once-in-a-lifetime opportunity. So they raised funds and started their investment boutiques. It wasn’t so difficult. They had already acquired foreign accents and all they needed were posh offices and other accoutrements of successful professionals. The rest of them were snapped up by Vetiva, BGL, ARM and Afrinvest.
These Gordon Gecko wannabes found willing allies in their less sophisticated Nigerian counterparts who had had clawed their way to the pinnacle of the banking sector through sheer determination and abundance of street smarts. Men like Tony Elumelu, Jim Ovia and Aigboje Imoukhuede were already top executives but they wanted more. When Professor Soludo announced his banking consolidation reforms in 2004, they knew that it was time to make their move and the investment bankers helped them draw up plans while they regaled them with amazing tales from Wall Street and The City.
These forays into the capital market were highly successful and the banks were shocked by the success of their plan. It was unbelievable. Traders left their businesses and started buying stocks and copies of Stockswatch. It was crazy. Complete strangers would accost you at stock brokerages and start gushing about the wonders of the capital market. The bankers took full advantage. As stocks reached stratospheric highs, they held on to the share certificates and embarked on countless public offerings.
That was the beginning of the problem. With more money came recklessness. Since these were mostly small banks that had made a quantum leap into the big league, they really did not know what to do with all this cash. Even after taking huge bonuses and settling their investment analysts, there was still too much money left and they did not want to tie it up in long term projects.
And since they had hired people based on pulchritude, personal connections and their clout with government officials, it was difficult to generate useful ideas internally. So they called their expensive analysts and sought advice. We think that this is the time to take big risks, suggested the former Wall Streeters and City bankers. Do you know that George Soros made a billion pounds in one day betting against the pound? You have to take big risks to make big money. And the benighted bankers gleefully nodded their heads in agreement.
They thought them how to manipulate the market and triple their market capitalization. But somewhere along the line, some of the bank executives began to show incipient signs of madness. Corrupted by money, they began to have delusions of grandeur. Their influential spiritual advisers told them that God wanted them to take over Africa. They believed the spin and drew up plans for an invasion of the Dark Continent. The rational directors who mustered the courage to object were publicly reprimanded or forced to resign. The Lord wants us to be the biggest bank in Africa by 2020, declared a certain chief executive at an extraordinary board meeting.
So in their quest for regional domination, they shelled out millions on banking licences and set up shop in Ghana, The Gambia and Cameroun. Despite its serious problems, FinBank inexplicably purchased an Islamic Bank in The Gambia. These bankers blithely forgot that the money could be used to set up refineries in Nigeria and solve the perennial curse of petroleum importation. They never bothered to consider the benefits of coming together to finance energy projects. No, it was better to open branches in banana republics. But then, this was a time of great foolishness.
The wonderful life of the Nigerian bank chairman
Sanusi Lamido Sanusi should have sacked the chairmen of the five troubled banks as there is no good reason for retaining their services. The term, chairman is the most misused title in the lexicon of Corporate Nigeria. A couple of entrepreneurs draw up plans for a company and then select a respected public figure to act as the chairman.
But the archetypal Nigerian bank chairman is no better than an expensive bronze statue adorning an ornate boardroom. He is usually an old retiree, almost senile and completely oblivious of the goings-on at the bank which he chairs. He is paid a huge sum for simply donning a starched dashiki and showing up at meetings. He flashes a megawatt smile for the cameras and drops one-liners about the bank’s performance even though he can no longer make sense of the figures in the beautifully-bound booklet.
In order to reform the Nigerian banking sector, there must be a new set of rules for selecting bank chairmen. A cursory look at the five banks shows that fossilized bank chairmen contributed to their descent into hubris. It is unfortunate that Dr Raymond Obieri who had the experience necessary for the job chose to get involved in insider loan abuses. He should be in Kirikiri.
Atedo Peterside, Gbenga Oyebode and Umaru Mutallab are examples of proactive bank chairmen who can still contribute to the growth of their respective institutions and it is much easier to prosecute them when their banks are found guilty of fraud. A chairmanship should not be a sinecure reserved for influential traditional rulers and retired businessmen who sign off on financial statements without reading them. What is the point of paying them for doing nothing?
Apostle Hayford Alile is a case in point. As a former Director-General of the Nigerian Stock Exchange, he should have known that something was amiss at Oceanic Bank. But he was also a sect leader who was probably too old to be bothered with accounting matters. It is no surprise that his name showed up on the debtor’s list recently released by the Federal Mortgage Bank. You cannot have your cake and eat it. If you get paid handsomely for chairing a company, you must be prepared to share in the blame.
Mrs Ibru and Sons Plc
The ascendancy of Mrs Cecilia Ibru’s two sons showed her nepotism. Oboden was the crown prince, while Obaro was a dissolute hophead. In addition to being the bank’s biggest beneficiary of insider loans, Oboden spent 1.5 billion naira of Oceanic Bank’s money on a second-hand Sikorsky helicopter at a time when the bank was already having liquidity problems. He was probably tired of the infuriating traffic and needed a chopper to take him to working lunches at ritzy restaurants.
However, Oboden’s excesses pale in comparison to those of his brother, Obaro, a junkie who spent a considerable portion of his time at rehab clinics and expensive hangouts. After a stint as the Chief Marketing Officer of Oceanic Bank, the drug-addled Obaro was given the official designation of General Manager, MD’s office. This unbelievable job description allowed the feckless scion to earn a hefty salary for doing absolutely nothing. Despite his long absences, Mrs Ibru promptly moved her son to the Human Resources department in 2008. Under his management, Oceanic Bank’s human resources department was accepting huge bribes from prospective job seekers to join its overpaid workforce. The absence of a meritocratic structure definitely contributed to the bank’s problems.
And in spite of its claims of building a stronger Nigeria by supporting small and medium scale businesses, Oceanic Bank was notorious for exploiting local entrepreneurs. Prospective loan seekers were forced to take out exploitative policies from Oceanic Insurance and burdened with other ridiculous management charges.
To Be Continued
See also The Sanusi Revolution (2)