The recent contravention of Central Bank of Nigeria (CBN) guidelines by deposit money banks, which has cost some banks a whopping N9.9billion in fines may have exposed the deteriorating corporate governance principles in the industry, BusinessDay investigations indicate.
The fear is that unless the CBN intervenes urgently through measures to plug the loopholes, the risk management structure put in place by the apex bank which has improved the assets profile of the banks and also improved investors’ confidence will be at risk.
Further investigations show that apart from non remittances of government money which had caused the CBN to impose fines of N4 billion on Skyebank; UBA, N2.9 billion, Firstbank, N1.9billion and N1 billion on Stanbic IBTC by the Financial Reporting Council, (FRC), most banks are yet to release to CBN , export proceeds for which some are being sanctioned discretely.
“There is a lot of impunity going on in the banking sector for which the CBN should introduce some extra measures to curb the ugly trend,” says a top management staff of a tier two bank.
“The actions and reactions that have trailed these events have brought to fore, questions on regulatory compliance, corporate governance and risk management practices of companies operating in Nigeria. These have also raised concerns — rightly or wrongly — on the business friendliness of Nigerian regulators to foreign investors,” say Afrinvest analysts.”
The analysts further say that the development, though capable of engendering confidence in the economy if the culprits are made to face the full wrath of the law, is capable of further worsening the high cost of doing business in the country.
“We opine that the series of regulatory sanctions dished out is positive for regulations and corporate governance in Nigeria if these companies are found liable as indicted. Thus, we expect this to increase investment confidence in Nigeria, rather than repelling investors.”
Friday Ameh, an energy analyst, says the only way out is for the CBN to punish the culprits openly, to serve as deterrence to others, adding that, “From all indications, the banks are becoming more comfortable with fines, since the funds withheld must have yielded enough interest to cover the fines by CBN.
“This was the greatest undoing of the banks in the 90s, as most of them ran foul of the foreign exchange rules and were feeding fat on round tripping and paying peanuts to CBN as fines. The time has come for CBN to name and shame all those banks involved in non rendition or disclosure of export proceeds.”
John Omachonu
