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Banking Reform:Sanusi Seeks Understanding of International Community

By Lucky Fiakpa
As public sympathy begins to wane on the Central Bank governor’s action that led to the sack of five banks chiefs a fortnight ago as more light is shed on the issues raised, the governor last Friday went abroad to garner support among the international community, Lucky Fiakpa writes

Sanusi
Sanusi

The governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, was in London last Friday to make a presentation aimed at addressing recent events in the macro-economic environment and banking sector.

The governor was accompanied by the new managing directors of Union Bank, Oceanic Bank, Intercontinental Bank, Afribank and FinBank. This might be considered appropriate to some extent given the many questions that have trailed the exercise casting doubt on the credibility of the CBN’s action.

Apart from that, the CBN governor also needed to reassure the international community that he meant well with the sack of the five banks managing directors – Barth Ebong, Union Bank; Sebastian Adigwe, Afribank; Cecilia Ibru, Oceanic Bank; Erastus Akingbola; and Okey Nwosu, Finbank.

S&P Adjusts Ratings onNigerian Banks
It is not clear of how much grounds the CBN governor’s mission could cover in terms of reassuring the international community but considering the recent rating of the country and the various banking institutions, which is a fallout of the CBN’s action, he may have to do more in that regard.

The revelations in the exclusive report contained in the Vanguard edition of March 23, this year, has already cast a shadow of doubt in his action because the speech of the governor that announced the sack of the banks executive went a long way to confirm the report. Sanusi may have spent more time therefore convincing the people that he meant well by his actions.

For now, the lines have started to fall in unpleasant places for the country and its banking institutions. Following last week’s cut in Nigeria’s sovereign credit ratings to B+ (for both foreign and local currency), with stable outlook, the ratings agency also made adjustments to its ratings on several banks in the country.

S&P lowered its long-term counterparty credit ratings on First Bank, Zenith and GTBank to ‘B+’ from ‘BB-’ and affirmed the ‘B’ short-term counterparty credit ratings. The outlooks are negative. Furthermore, the agency lowered its long-term national scale rating on Zenith to ‘ngA’ from ‘ngA+’. At the same time, they affirmed the ‘ngA’ long-term Nigeria national scale ratings on First Bank and GTBank and the ‘ngA-1’ short-term national scale ratings on Zenith Bank, First Bank, and GTBank.

In addition, they revised the outlooks on Access and FCMB to negative from stable and affirmed the ‘B+/B’ counterparty credit ratings on Access and FCMB. They also affirmed the ‘ngA-/ngA-2’ Nigeria national scale ratings on FCMB and the ‘ngA-’ Nigeria national scale rating on Access.

The ratings changes follow the recent actions by the CBN in the sector. S&P comment that, despite concerns over the country’s credit markets “in our opinion, the central bank’s action has begun a welcome restructuring of Nigeria’s banking system”. They also forecast that the government will increase its borrowing requirement as a result of the intervention in the banking sector and they forecast a 2009 deficit of 4.5 percent of GDP. They do not, however, see any risk of a balance of payments crisis.

Rule of Law
Apart from assuring the international community that all was well with the nation’s financial system, there was also the need to make them know that the manner of arrest and detention of the bank management and debtors was within the country’s rule of law.

In other spheres, thorough investigations would have been concluded to ascertain the culpability or other wise of a suspect before proceeding to make arrest if the result of the investigations shows there is need for such arrest. It appears, in the Nigerian situation, arrest is made first before looking for evidence to prosecute the suspect. Sanusi should be able to convince the international community that there is nothing wrong with this legal approach in the 21st century.

For more than a week now, three of the sacked managing directors and their management have been held in detention without trial.
Only last week former Managing Director and Chief Executive Officer of Oceanic International Bank Plc, Mrs. Cecilia Ibru, submitted herself to the Economic and Financial Crimes Commission (EFCC) at the Lagos office of the commission after being declared wanted. But rather than release her, the anti-graft agency detained the former Oceanic CEO even though she was armed with a court order granted by Justice Bukola Adebiyi which restrained EFCC from infringing on Ibru’s fundamental human rights.

Following the imminent clamp down on the sacked CEOs of the five banks as well as other bank debtors by the commission, Dr Cecilia Ibru, had approached a Lagos high court to stop her arrest.

Ibru showed up at the EFCC office at about 2.50 pm in company of her lead counsel, Chief Adeniyi Akintola (SAN), and some other personal aides. As soon as she got down from her black Prado SUV, she was ushered into the office of EFCC’s Director of Operations, Mr. Stephen Otitoju, for interrogation, which lasted about 38 minutes.

Later, Ibru was led to the EFCC office located on Okotie-Eboh Road in Ikoyi, Lagos for the continuation of the interrogation. While she was being led back to her car, she was being escorted by two whitemen, a dark woman and man who kept on comforting her.
EFCC had last Sunday declared Ibru and former Managing Director of Intercontinental Bank Plc, Mr. Erastus Akingbola, wanted following their failure to honour the commission’s invitation over the huge debt profile of their banks.

The same court also granted an order that the former Managing Director of FinBank Nigeria Plc, Nwosu, and his AfriBank Plc counterpart, Adigwe, be released from detention on bail. Both Nwosu and Adigwe were still being detained as at press time.

The three other bank chiefs sacked along with them by the Central Bank of Nigeria (CBN) two weeks ago namely Union Bank’s Bartholomew Ebong, FinBank’s Okey Nwosu and Afribank’s Sebastian Adigwe have been in EFCC’s custody for more than one week now.
The total non-performing debt of the five troubled banks is put at N747 billion. A breakdown of the loan indicated that Oceanic had N278 billion, Intercontinental N210 billion, Afribank N141.8 billion, Union Bank N73.6 billion and Finbank N42.445 billion.

Meanwhile, Chief Wole Olanipekun (SAN), counsel to  Nwosu and Adigwe, complained to the EFCC chairman Farida Waziri over the non-release of his clients, despite a subsisting court order.

In a terse letter dated August 26, Olanipekun said: ‘’I write this letter on behalf of myself and Chief Anthony Idigbe (SAN) and as counsel to the above named gentlemen who have been detained by your commission since Tuesday, 16 August, 2009.

‘’On behalf of each of them, we filed an application before the Lagos High Court for the enforcement of his (sic) fundamental human rights. On Tuesday, 25 August, 2009, the Lagos High Court, presided over by Adebiyi J. granted each of them leave to enforce (his) fundamental human rights and, in addition, directed that your commission should admit both of them to bail on reasonable conditions. It should be noted that your commission had, inter alia, granted Mr. Okey Nwosu bail subject to his meeting some very stringent conditions and which said conditions he met. However, your commission still refused to admit him to bail.

‘’As a respected colleague of ours, who also doubles as the Chairman of the EFCC, we have no doubt that you will always respect and excuse and execute the orders of our courts. Apart from the fact that your commission has been formally served with the enrolled papers in respect of the two gentlemen, we attach herewith copies of the said orders, with the belief that you will use your very good offices to direct their admission to bail on reasonable conditions, as per the orders of the courts. Accept the assurances of our highest regards’’.

Arrest of Debtors
So many issues are still to be resolved concerning the actual debt stock as many of the published debtors have been faulting the debt attributed to them by the CBN. But last week the EFCC sent out five separate teams of detectives after some of the bank debtors and each team was mandated to effect arrest of at least 10 debtors per day.

According to the commission, there would be no hiding place for any of the debtors and the best option for them was for them to pay up their debts or submit themselves to the anti graft agency. Speaking further on EFCC’s operations in Lagos, Mr. Femi Babafemi, the spokesman for the commission, said no fewer than 24 bank debtors who were either arrested or surrendered themselves freely on their own volition were in the commission’s custody.

The Chairman of Zenon Oil, Mr. Femi Otedola, and Chairman, Ikeja Hotels, Mr. Goodie Ibru and Director-General of the Nigerian Stock Exchange (NSE), Professor Ndi Okereke-Onyiuke, were expected to appear at the EFCC office on Thursday. The EFCC spokesman further disclosed that also expected at the EFCC office Thursday are representatives of Isiaku Rabiu Airline (IRS) and Chanchangi Airline and one Air Vice-Marshall whose name he did not disclose. Babafemi said the sum of N600 million was paid into the coffers of Union Bank of Nigeria Plc Wednesday.

However, to escape EFCC’s arrest, some top bank debtors Wednesday were said to have scurried to the agency’s office in Lagos to tender title documents of choice properties, as guarantees that they would repay their loans. Scores of notable bank debtors trooped to the premises Wednesday to beat the deadline to pay up.

The EFCC’s threat to the debtors to pay up or face prosecution, appears to be paying off, as about N6.7 billion had been recovered, as at yesterday evening, from debtors of Oceanic Bank alone.

The one-week ultimatum given to the debtors of troubled banks to pay up expired Wednesday, and the commission had vowed to turn the heat on the debtors by going all out Thursday in search of defaulting ones.

The EFCC Chairman, Mrs. Farida Waziri, ahead of the start of the manhunt for the debtors, relocated to Lagos, Wednesday, alongside 100 operatives and two units of mobile policemen.

Debtors and the Economy
Except these debtors are differentiated, there is the likelihood that those who defaulted in payment due to no fault of theirs might be grouped together with those who took loans with no intentions of repayment. For instance, Senator Aniete Okon, Chairman of Rockson Engineering Company, is contesting the size of debt his company is said to owe Intercontinental Bank.

He described the step taken by the CBN as inaccurate and uncalled for. He said the firm was indebted to Intercontinental Bank to the tune of N14.4 billion and not N36.9 billion as claimed by the apex bank. “For the avoidance of doubt, we like to state that our reconciled and mutually agreed commitment with Messrs Intercontinental Bank Plc is N14, 423, 291, 589.49,” he said.

Apart from that, he stated, the facility was procured to execute the Federal Government’s NIPP scheme for which money has not been released. “This exposure with Intercontinental Bank Plc derives directly from the provision of credit facilities to substantially fund the letters of credit for turbines and balance of plant equipment for the execution of Federal Government’s NIPP comprising the construction of power stations at Alaoji Gbarain, Egbema and Omoku over which our invoices on certified stand at nearly $800 million,” he said.

He stated further that the funds it allegedly raised from Intercontinental Bank were meant for implementation of the power projects it is handling for the Federal Government, which has failed to release money for the plants. The projects, according to him, are the Alaoji (1072MW), Gbarain (225MW), Egbema (338MW) and Omoku (230MW) power stations.

Okon said this “misinformation” has begun to take its toll on the implementation of the power plants as some manufacturers abroad are concerned with the issue and reacting accordingly.

Also speaking in the same vein, Mr. J. I. A. Arumemi-Ikhide, Managing Director, Rockson Engineering Company, said the classification of the account with Intercontinental Bank as “non-performing,” was very misleading and therefore cautioned against actions that could erode confidence in the Nigerian economy. He alleged that the government was yet to pay the company any money for the project, which he said was now at 70 per cent completion.

Abdulrahman Rahamaniyya, chairman, Rahamaniyya Oil and Gas also has a similar story to tell. In an advertorial carried by the company last week, he said it was not true that the loan the company got from Intercontinental Bank was not performing. The company admitted taking the loan but said problem arose when the oil price and the exchange rate of the dollar crashed.

As a result, the company decided to approach the bank for restructuring of the facility. The loan was therefore restructured for two years and the company claimed that based on the new agreement, it paid a part of the loan recently. The company therefore wondered why the loan should be classified as non-performing.

Fredrick Akinruntan, Chairman of Obat Oil and Petroleum Company described the inclusion of his name in the debtors’ list as embarrassing, claiming that the report did not reflect the reality on ground.

He is said to owe Oceanic Bank N4.47 billion but according to a report credited to him, he said he collected N2.5 billion from the bank to develop a property in Abuja and has never defaulted on the terms he agreed with the bank and therefore denied owing any unserviceable loan.

One of the counsels to Oceanic Bank, R. Ajibola Oluyede of TRLPLAW further reinforced these positions when he said that his “client is being punished because of its heavy support for the importation of petroleum products, which is an essential commodity, and without such support could have become scarce and result in political upheaval.

To ensure that the country has uninterrupted supply of petroleum products banks finance importers of petroleum products. These importers are licensed and duly approved by PPPRA an agency of the government, which issues importers with import quotas based on which it pays subsidies on imports of kerosene and petrol.

“Based on amounts advised by Oceanic Bank’s customers, over N20 billion is yet to be paid by PPPRA to these customers’ accounts with Oceanic Bank in respect of LCs dating as far back as December 2008. The bank has fully paid the overseas suppliers whilst PPPRA is over eight months in arrears in reimbursing the bank. There was a letter from the Association of Major Marketers of Petroleum Products to the PPPRA advertised at page 16 of The Punch newspaper of Tuesday, August 18, 2009 which confirms that PPPRA owes members of their association over N70 billion. How are the banks that have in good faith supported the government’s petroleum subsidy programme to be held responsible for the delay by PPPRA to pay” it queried.

Ajibola Oluyede further said that, “CBN is fully advised of all foreign lines accessed by Oceanic Bank and at no time did CBN advise or caution against these lines. The lines are used to service the domestic economy and are used to finance critical imports like petroleum products. Whilst these positions were open the CBN without warning devalued the currency by N30 to the US dollar; without consideration for the loss implications of the open lines. For a foreign line base of $500 million it translated to a cash loss of N15 billion to the bank”.

Perhaps informed by this approach of the CBN governor to the entire issue, Chief Olu Falae, last week decided to caution Sanusi pleading with him to be civil in his method of reforming the banking sector. According to report credited to him, he said, “the style of the Central Bank is totally unacceptable.

The Governor of the Bank is a public officer, he’s entitled to do his job according to the dictates of the law and findings of the banks, but he has no business to start flexing muscles and start threatening people that he’s going to deal with them.

“It is not a personal quarrel and unless they want to tell us that there is personal agenda in this matter. If you are merely doing your job as a public officer you are not allowed to be making all those noises; Sanusi should be disciplined for going beyond his brief and threatening individuals in the banking industry. Getting angry and threatening people is a luxury he cannot afford. Somebody should tell him to shut up. It’s totally unacceptable”.Hope that he listens as he returns from his London trip this week.
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1.    In other spheres, thorough investigations would have been concluded to ascertain the culpability or other wise of a suspect before proceeding to make arrest if the result of the investigations shows there is need for such arrest. It appears,


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