By OMOH GABRIEL BusinessÂ Editor
*Is Sanusi looking for soft landing or at the end of the road?
SANUSI Lamido Sanusi seems to be walking on a very tight rope which he can not afford to fall from.
Two weeks after the announcement of his reform which claimed five bank executivesâ€™ jobs and sent the EFCC after them, reason is beginning to prevail. Sentiments are over. Sanusi apparently has forgotten that Federal, State and Local governments are owing the banks.
The governor has not released figures of how much the public sector is owing local contractors. He has not sent the EFCC after serving ministers, state governors, heads of parastatal and the president himself who authorised government contracts for which the government is owing so much.
The federal government is owing the banks a total of N3.2 trillion on account of borrowing from domestic banks to meet up short falls from budget provisions. The government is owing local contractors the sum of N1.5 trillion. So far the Sanusi crusade has left the public sector out of the debt recovery effort. If the N1.5 trillion the government is owing local contractors is paid most would have been able to settle their obligation to the banks. The major sin of the five banks, according to Sanusi and EFCC, is non performing loans.
At the press briefing to announce his decision, which he said has the backing of the President Umaru Yarâ€™Adua, Sanusi said the examination of the five banks was conducted by a joint team of CBN and NDIC officials. He accused the five banks ofÂ high level non-performing loans which he attributed to poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bankâ€™s credit risk management practices. Thus the percentage of non-performing loans to total loans ranged from 19 per cent to 48 per cent. The five banks will, therefore, need to make additional provision of N539.09 billion.
The total loan portfolio of these five banks was N2.801 trillion. Margin loans amounted to N456.28 billion and exposure to Oil and Gas was N487.02 billion. Aggregate non-performing loans stood at Nl,143 billion representing 40.81 per cent. The question now is what role did the non payment of federal government N1.5 trillion owed to contractor play in the one sided figures provided by Sanusi Lamido Sanusi.
As the heat turns on Sanusi and his backers with the federal government keeping mute, he is now singing a discordant tune. On Thursday, the CBN issued a statement saying: â€œThe injection of N420 billion into the five affected banks is neither equity nor a bailout by government but a normal central banking function of lender of last resort to the banks.â€ The CBN in the statement signed by M.M. Abdullahi of the Corporate Affairs Unit CBN said: â€œThe money is a loan to the banks to improve their liquidity to enable them meet their obligations and will be paid back to CBN at a premium. The CBN Act empowers the CBN to manage money supply in the economy through different mechanisms.
The CBN, as banker to the bankers, has been increasing money supply by lending money to the banks through the Expanded Discount Window (EDW) and the injection of the N420 billion into the five banks is an extension of that function. The money is not from the government treasury/federation account and the CBN believes that it does not require any appropriation by the National Assembly as claimed by some analysts:
â€œThe town hall meeting at London was not about selling Nigerian banks but explaining the actions of the Central Bank of Nigeria to the international community particularly the correspondent banks who advance credit lines to Nigerian banks. The governor and the new managing directors of the affected banks did not discuss the issue of selling the banks with any foreign investor or group of investors. The governor, however, reiterated that there is no law in Nigeria barring foreign investors from investing in Nigerian banks but the CBN will ensure that only foreign investors genuinely interested in the development of the Nigerian economy will be entertained.â€
If indeed the CBN was granting the banks loans why the noise to disrupt the system. CBN records show that before Sanusi was appointed CBN governor one of the banks was given a life line of N70 billion. No one outside the CBN heard of it. If it was a loan, was it then necessary to sack the executives of the banks and plant those preferred by the CBN? If it was a loan was it asked for by the affected banks some of which did not need the said facility and have now placed the funds in the interbank market?
Sanusi had forgotten perhaps the letter he signed and delivered to the chairmen of the five affected banks. In that letter Sanusi said that at the discretion of the CBN governor, the funds injected into the banks could be converted to equities. The bankers had expressed fears that the CBN governor had made up his mind to forcefully take over and change the ownership structure of the affected five banks hiding under the cover of the CBN Act. His words: â€œBy order I, Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria, hereby require Xbank to take the following steps and do the following acts: immediately acknowledge the injection of the sum of N billion only, by the CentralÂ Bank of Nigeria, to address the grave situation aforesaid, as credited to the bankâ€™s main accountÂ maintained with the Central Bank of Nigeria, on the terms of a financial accommodation agreement as may be prescribed by the Central Bank of Nigeria, including but not limited to the following:
At the option of the Central Bank of Nigeria, the advance shall be convertible into fully paid up securities of the bank; the advance shall be for a maximum tenor of seven years: if the conversion option is not exercised, the advance shall only be callable after the fifth anniversary of the grant of the advance; and the advance shall be subordinated to all other creditors of the bank. Give full effect and implement the financial accommodation agreement in respect of the advance made available to your bank by the Central Bank of Nigeria as aforesaid, and executed by the managing director/chief executive officer appointed by my order as aforesaid,
â€œAdopt, ratify and implement any business continuation plan prepared by the managing director/chief executive officer appointed by my order as aforesaid and approved by the Central Bank of Nigeria, I, Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria, by virtue of the powers vested in me by Section 33(1)1 of the Banks and OtherÂ Financial Institutions Act, Cap 33, LFN, 2004, having been satisfied that: it is in the public interests so to do because, inter alia, Xbank showed excessive liquidity stress with persistent use of the Expanded Discount Window of the Central Bank of Nigeria; and has been carrying on its business in a manner detrimental to the interest of its depositors and creditors, ordered a special examination into the books and affairs of the bank on June 22, 2009″.
As it appears now, the governor is speaking from both sides of the mouth. With one breath he accused the five banks of excessive borrowing from the inter bank market with the other he is giving them more facilities from the same window. At his August 14, press conference, Mallam Sanusi said, â€œAs a matter of fact, the outstanding balance on the EDW of the five banks amounted to N127.85 billion by end July of 2009, representing 89.81 per cent of the total industry exposure to the CBN on its discount window while their net guaranteed inter-bank takings stood at N253.30 billion as at August 02, 2009. Their Liquidity Ratios ranged from 17.65 per cent to 24 per cent as at May 31, 2009. (Regulatory minimum is 25 per cent).
What Sanusi Lamido Sanusi has not addressed is the policy he met in which the CBN asked that no Nigeria bank should have more than five per cent shareholding by state governments. When he met journalists in Lagos Sanusi told them that a particular bank was very liquid because governors of the states that have shareholding stakes in the bank hade pumped money into its vaults.