The Sanusi Revolution (5)

No one saw it coming, except a news report that seemed harmless, impulsive and out of joint with professional rigour. Enter Lamido Sanusi, the slight, soft-spoken but voluble man. He became the governor of The Central bank of Nigeria and an enabler and counterfoil of money at once. Enter the Sanusi Lamido revolution.

He shook the banks first by Sam Omatseye

No one saw it coming, except a news report that seemed harmless, impulsive and out of joint with professional rigour.

Enter Lamido Sanusi, the slight, soft-spoken but voluble man. He became the governor of The Central bank of Nigeria and an enabler and counterfoil of money at once.

His entry was as dramatic as the exits he crafted. Five bank chiefs fell. More later. Five boards fell. More later. Celebrity bankers fell from being toasts to toast. They became epithets for reckless professionalism and personal profligacy.

The poor gloated and rejoiced. They took consolation that their poverty did not come from other people’s money. Revelations staggered the headlines. Big-time names, big-time business men scrambled to outdo each other in rebuttals of their levels of indebtedness.

EFCC came in to reinforce the theatrics. Farida Waziri pitched her tent in Lagos, squeezing billions after billion in debt recovery. The crime stopper became a debt recovery machine.

The “prophetic” news report was scooped up for good measure. Was Sanusi in this for the altruism or for the pursuit of a subterranean agenda, to foist a new cadre of elite from the north on the banks? Or was it coincidence.

He said no. His foes amassed strength and fought back. He stood his ground. An opacity seized the nation.

That was not all. If he was pursuing not an agenda for the north, was there still not another chink in his armour? Why were some banks singled out, and few bad ones let go? He said there were no bad eggs.

Some banks had bad loans and remained in the black. Others had bad loans and fell not only into red, but the bosses were shown the red card. Did the man not contradict himself? Was he not zeroing in on those who failed rather than those who committed felony?

Within a month, the slight man had brought out fundamental fears and optimism in the nation. The banks stood now for efficiency, and proper procedure. No more banks without collateral. No more Jamboree loans.

By the end of the year, banks no longer rolled out fantastic profits, but mammoth losses. This man’s measure must be working. But at what cost? What of the banks who got away? Who will punish them?

His action called forth many of the nation’s pains and panaceas. He invoked ethnicity, and the perennial hobgoblin of northern mafia. He drew attention to excess among the elite, the lifestyle of extravagance. Banks became efficient, but not profitable. Money became efficient, but no businesses enjoyed loans.

Insularity. Extravagance. Class war. All of them triggered by the actions of one man in a critical sector of the economy. Nor was politics immune. His predecessor, the guttural, debonair Soludo who wrought the mess started a new career in politics. He wants to be governor in the most contentious state in the polity. If he wrought the mess, should he run for governor?

With the contradiction of aristocratic bearing and the sullen brow of a technocrat, Sanusi embodied the nation. He embodied an elite trying to fight and preserve his class. He also fought to save the money for the poor, if the poor suffered more for absence of liquidity and jobs. A double whammy, quintessentially Nigerian.

For provoking primordial questions of state and unearthing ethical rut, thereby polarizing the society between cheerleaders and opponents in profound aspects of our lives in the course and consequence of his banking reforms, The Nation has picked Sanusi as our person of the year.

Lamido Sanusi: Did his war get out of hand? By Sanya Oni

Since the global economic crisis berthed in August 2007, it seemed inevitable that the managers of the Nigerian economy would at some point confront its own variant of the demons which have held the economy down.

July 2009, President Umaru Yar’Adua named Lamido Sanusi Lamido – the risk expert from the royal lineage of Kano as Governor of the Central Bank of Nigeria (CBN) in place of the Chukwuma Charles Soludo, the apostle of consolidation.

It was the signal that changes were imminent. It was time to visit asset price bubbles, the crisis of governance in the financial system, the regulatory lapses.

After the 18-month long consolidation programme which collapsed 89 financial supermarkets into what became the 25 bubble castles, it was time to put the brake to a descent into chaos.

Clearly, there was no question that the nation was nowhere near the healthy and safe banking system promised. Nor did the performance figures churned out by banks bear no relations with realities in the market space, rules on reporting standards were being adhered to only in the breach. Reports of insider dealings and credit abuses were rife. In the heat of the obsession to deliver global brands, the regulators went to sleep. Extant controls put in place to ensure safe and sound financial services system were ignored by the operators. Nigerians watched in horror as the extant practices that defined the conservative art of banking as shrewd business were sacrificed on the altar of unbridled expansion and unprincipled risk taking.

True, everything needed for a revolution of sorts in the financial system was already in place. What was needed was the trigger.

Sure enough, it came in the form of the global economic crisis. As credit markets froze and its contagion ravaged global capitals. The capital market, once the darling of portfolio investors, took a deadly hit.

For many of the operators known to have gone into margin lending, it was time to bite the bullet. Initially, nearly everyone – the regulators and the operators alike, denied that the crisis was serious enough to threaten the financial system.

The house of consolidation would soon unravel in a monumental crisis of liquidity. The economy was in deep trouble. The time to paper over the cracks was gone.

Belatedly, Soludo moved in to expand the discount window to give the troubled banks a breather; then he offered to guarantee placements under the interbank markets to ease up the system. As it turned out, it was too late.

Enter the Sanusi Lamido revolution.

At his coming June 2009, the banking system had become the butt of idle jokes in street corners. With nearly half a dozen of the banks on life support provided by the apex bank, the crisis was past denial. Rumours festered and gave wings to the crisis of confidence. The Armageddon, predicted for the nation’s banks, had come.

This was the Sanusi charge: to quench the fires. For his tiny frame, he carried the burden of expectations the most significant being how far he would or could go to clean the rot in the banking industry. With a career straddling academics, ABU (1983-1985), then banking, first with Icon Limited (Merchant Bankers), and later to United Bank for Africa where he distinguished himself as an expert in Credit Risk Management before moving on to First Bank as its chief executive officer, he certainly came well prepared for the job.

Diagnosing the ailment proved the easier part of the job. Like someone who knew what he had to do, he declared soon after his assumption of office that “If you want to take action and action is decisive and far-reaching, you have got to do it in a manner that has the highest chance of success”. His famous quote “It is not a crime to make a loss, but it’s criminal to lie about it” was to set the tone for his mission at sanitising the financial services industry.

It would appear that on those phrases hung the nemesis foretold for the banking industry.

Unlike his predecessor who perhaps set out to carve the financial landscape in his image a la consolidation, Sanusi did not even pretend to any grand ambition. He insisted that all he wanted was to get the job done. No matter that he comes across as a zealot with his rather unbridled exuberance: he talked when he had no need to; while at other times, he spoke too much for his own good.

His actions are as far-reaching as can be; undeniably, it would match those of his predecessor by its transformational powers.

The latter hold the record of erasing the jobs of 64 CEOs at the conclusion of his consolidation programme. Since the August 14 tsunami which caused the erasure of the jobs of the executive management of the five banks – Afribank, Intercontinental, Oceanic, Union and Finbank, the industry has never remained the same. Scores of careers continue to be swept off in the gale of Sanusitisation.

Controversy has since become his second name. First, was the unilateral sacking of the executive management of the first five banks before the conclusion of the industry wide audit exercise. There are many who still insist that the method could have been tidier – the suggestion here being that he could have summoned the boards of the banks to do the dirty job of firing those managements for him. He would later adopt a less abrasive style at the conclusion of the special examination of the remaining 14 banks when more bank executives were fired.

In all the sackings, no one has yet suggested that he exceeded the limits of his powers. And certainly, no one has hinted that the axed chiefs do not deserve the fate that befell them.

his actions brought a new energy in ethical conduct, relacing excess with discipline. He explained his injection of N400 billion to bail out the banks without recourse to the National Assembly as deriving from his powers while maintaining that he needed no authorization from any institution.

It seems clear that a number of the measures came across as hasty if not downright impetuous. The measures include the unorthodox “name-and-shame” tactics of publishing the names of debtors. Only about 15 per cent of the debts have been recovered from the debt portfolio in excess of N700 billion.

For a conservative banker, Sanusi has been too outspoken for a job. He was reported as saying that the sacked bank executives now standing trial deserved to die by firing squad.

Again, his approach tends to be simplistic. One example of such is the contradictory signals. It seems he could not separate outrage over alleged infractions by the bank chiefs from the requirements to follow through with the dictates of the law.

Sanusi also suffered accusation of dictatorship and that he could undermine risk-taking, which is at the heart of entrepreneurship; again, it is being suggested that the reforms being pursued could undermine the autonomy of the banks.

He has also not escaped the charge of applying double standards in his treatment of the bank chiefs. Take for instance the case of Equitorial Trust Bank (ETB). After sacking the board, the apex bank under him would capitulate to grant the request of the shareholders of ETB to be allowed to rectify lapses identified in the bank and to subsequently take it over. Many are still wondering why the other banks were not allowed the option.

There are those who see Sanusi as not having gone far enough with his crusade. They point to the rot in the CBN itself. Where was the apex bank when all the crimes alleged by Sanusi were being perpetrated? Where are the officials who condoned or even abetted the alleged crimes? How come it is only the operators that are being demonized? When will the physician attend to itself? In all, he injected a new vigour of ethics and commonsense to banking, away from the lazy surrender of his predecessor to banking without strict rules.

In his words

I would like to tell you that anything I do, I inform the President of the country. The President is fully aware of the actions I took. He is totally aware of any steps I have taken. I informed him about any steps I’m taking and he has always been backing me. He is aware of this development and he has given total support. He has given me full authority to restore confidence in the industry. These steps are taken in the interest of the financial system.

But the bail-out was never to cover losses and the bail-out was to meet obligations. It served that purpose. They’ve not defaulted on any obligations. The whole purpose of the bail-out was to give them enough to make sure that they could meet their obligations with their creditors and not be under any pressure to repay. And that purpose was served. It was always clear; to arrive at the full extent of the financial requirements you’d need a more thorough job. Look in the United States, in Europe, the banks are still taking write-downs 24 months after they started. The market moves, they discover new things.

Nobody ever guarantees that his actions would change a system but one thing that is guaranteed is that inaction never changes a system.

Clearly a problem is power; the government hasn’t delivered on power. And the reason in our mind is that there has been, in the last two years, so much emphasis on spending money on power and les on pushing forward the reform process. Until you get power right you are not going to have manufacturing. If the government is not leading on power, you are not going to have manufacturing and if they (the banks) don’t lend to manufacturing, and they have got all this money they have got to return to shareholders, they are going to get into real estate speculations, capital markets speculations, commodities-related speculations. So, the power reforms are at the heart of what we do.

The CBN will not waiver in its desire to ensure that public confidence in the Nigerian banking system is maintained through appropriate disclosure and reinvigoration of its policy of zero tolerance on all professional and unethical conduct. We will not allow any bank to fail. However, we will also ensure that officers of banks and debtors who contribute to bank failures are brought to book to the full extent of the law and that all proceeds of infraction are confiscated where legally feasible.

When you are going to remove the bad guys people said you can’t do that, we don’t know what is going to happen; and we have removed them. And before a Court of Law I will put some of them in prison; they will go. We will push it to the Supreme Court, we will make sure that in the cases where we do have evidence that can stand in a Court of Law we will make sure that we pursue that to its logical conclusion.

In addition to the standard central bank duties of monetary policy and financial stability, I will set myself two primary tasks. The first one is restoring confidence in the financial system. The second one is slightly less conventional but it is actually playing an important role as an agent for development. I think the governor of the (Nigerian) central bank cannot be the governor of the Bank of England, and just talk about money supply and interest rates and inflation. The financial system plays such a pivotal role in the economy, that the governor of the central bank has to see himself even though not a politician, as an important part of the government with a responsibility for delivering economic growth.