When Sanusi took over as the CBN governor, the Nigerian banking industry was just reaping the gains and pains of consolidation. The situation was compounded by the cross-currents of the global economic crisis which was already thawing in other parts of the world. The banks had just become bigger, moving from N3 billion to N100 billion through stage-managed IPOs. They had excess cash to do business with and with a legendary reluctance to lend to the real sector, they all invaded oil, real estate and stock market, dealing as financiers and in their own accounts. They broke and bent the rules to do some of these things and the regulatory authorities pretended not to notice. But the mercenary portfolio investors were also selling off so as to plug the holes at home and by the time the bubble burst, most of the banks were on life-support. However, they were keeping up appearances, pretending as if things were normal when things were gravely abnormal. The CBN did not want to act openly or rather preferred to take a subtle approach to the crisis. There was no way the CBN could have been ignorant of the real situation of things as at 28/2/09 when Soludo vacated office after a ‘fierce battle’, mostly through proxy, to retain the most powerful appointive office in the land.
Then Sanusi II came on board. We are all aware of the saying that to a carpenter, everything is a matter of nail and hammer. Sanusi had been in the risk management arena before he acceded to both the FBN and CBN thrones. He was also an insider and so he knew where the dead bodies were hidden and where all the genetically-modified accounts were hidden: under the carpet or on top of the ceiling. A special investigation was carried out (never mind that he denied his former colleagues the right he enjoyed as a bank MD: sighting copies of the report), heads rolled and public funds to the tune of N620 billion flowed into private businesses. You see, banks are always lucky whichever way you take it: they either win or they win. They take our money, play football with it, get into trouble and we are all blackmailed to rescue them with the threat of more trouble if we do not. It is the same all over the world. The only difference is that over there, those responsible find themselves inside the prisons with the regularity with which NEPA/PHCN/DISCOs take light. In Nigeria, they just lose their jobs, make some orchestrated court appearances, and life continues at a higher plane! Of course, they never learn any lessons and as soon as they are let off the hook, they are back to the same financial signs and wonders that created the initial trouble and another, more serious trouble is the result.
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Anyway, Sanusi published the list of debtors (my mouth is too holy to mention the head-breaking and heart-rending debts listed against some individuals and firms) and brought in the police, army, and the EFCC, in a desperate and controversial effort to recover these debts. He would have probably engaged the area boys if they had some registered consultancy outfits to deal with! There were also several policy steps to address the major weaknesses of the banks: poor corporate governance, inadequate risk management practices, huge non-performing loans, drastic capital erosion, and severe liquidity challenges. For instance, by 31/12/09, total adjusted shareholders’ funds for all the insured banks significantly declined from N2,379.23 billion recorded in 2008 to N448.99 billion (81 percent decline) as a direct consequence of making full provisions for their non-performing loans (NPLs). Some of the banks could not meet the capital adequacy and liquidity ratios and were perpetually dependent on the expanded discount window. NPLs had ballooned from 6.3 percent in 2008 to 33 percent in 2009, as against a worst case threshold of 20 percent. On the basis of CAMEL rating, no bank scored an A, while only one scored a B. The rest scores were C: 11, D: 3, and E: 9. Extra policy steps include reduction in Monetary Policy Rates, Cash Reserve Requirement and Liquidity Ratio and suspension of liquidity mop-ups: there was no liquidity to mop! (To be continued)
Still on DISCOs, and dancing with tears. On 20/10/14, I reported about an Ijebu-Ode community that protested when they were asked to ‘contribute’ so that their problems would be solved by the local DISCO. (DISCOs: The same people, the same thing, just a different name). Well, the matter has turned a full circle. They protested from Ijebu-Ode to Ibadan and to Abuja. The final authority ruled thus: if they are not willing to contribute, let them wait until we have the materials. It was when they went to local DISCO office for a feedback, the local operatives mocked them: keep on protesting or are you tired? They consulted and decided to surrender and raise the required funds but the officials now told them that they were not ready for them yet. They want them to suffer for daring to protest. Private operators indeed! The story is getting more interesting!
Ik Muo
