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Sanusi’s Bank Quake

CENTRAL Bank of Nigeria Governor Lamido Sanusi would not have been under any illusions that his decision to sack managing directors of five banks, with their executive directors, would result in a tremor in the banking industry, even if the decision was meant to halt an accumulating quake.

Friday’s sack of managing directors  and  executive directors of Intercontinental, Union Bank, Oceanic, Afribank and Finbank is a record for disposal of banking chiefs, and in an era all the banks were private concerns.

Sanusi said the decision followed the examination of the five banks by a joint team of officials of CBN and Nigerian Deposit Insurance Corporation, NDIC. Interestingly, officials of both organisations over the years awarded these banks high grades.

The audit had damning scores for the five banks  for excessively high level of non-performing loans, poor corporate governance practices, lax credit administration processes and absence or non-adherence to credit risk management practices.

Even with the huge profits the banks were declaring, Sanusi said the truth laid elsewhere. The five needed additional provision of N539.09 billion to match the level of their operations.  The banks failed in other indices of healthy banks and one of them was technically dead.
Good news from Sanusi was that depositors would not lose money, following government’s intervention in injecting the required funds.

Sanusi could have acted with all the good intentions in the world. He had a point that the banks if left unattended could take others on their way down.

However, the taints came from the haste in the execution of his plan. If the examination of the remaining banks would be concluded by mid-September, as he said, what was the hurry in punishing the five immediately? What would be the punishment for worse cases, if they were found?

Could the banks have been given time to find the money, instead of injecting public funds at a time government cannot fund its own budget? Does the CBN realise the type of panic the action can cause in the banking industry?
Various dreary fates await the sacked bank chiefs. The possibilities included prosecution and jail terms. What is baffling is that officials of the accounting firms, CBN and NDIC that garnish the annual results of these banks would never be punished.

When the banks failed in 1994, the accounting firms that affixed their seals to their cooked books were not punished. In the same way, NDIC and CBN officials who periodically examined the banks went scot-free.

Sanusi should show the profundity of his seriousness by examining the culpability of CBN officials in the state of the banks. The records of CBN officials who passed the accounts of these banks over the years must be available.

It is time to find out their motive in building this instability into the banking system. If Sanusi resolves the matter at this level, he would save the public its funds and the panic of wondering about the safety of its deposits.


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