By Emmanuel Majebi
The recent sack of the Managing Directors and Executive Directors of 5 Nigerian bank – Intercontinental Bank PLC, Fin Bank, Union Bank, Oceanic Bank and Afribank – brought to the fore one of the major reasons why our country may not proceed too far on the path of development in a hurry – Tribalism. One of the most important tools for national development in any nation are its laws. IfÂ a nation is going on a direction which the peopl e and their leaders have identified as not too favorable for development, the only way to steer away that nation from the unproductive path is by making new laws that will point the nation towards a new path.
For example in the 80â€™s when the Buhari – Idiagbon Government identified lack of patriotism and disorderliness as the major bane to our development they made laws to push the nation towards the path of orderliness and discipline. The problem with Nigeria however has never been with unavailability of Laws; the problems have always been that of inability or reluctance or even at times blunt refusal to enforce these laws.
There are many reasons why the very many beautiful laws in our Statute books are never really enforced and in my own humble opinion one of the major reasons is tribalism. Tribalism fouls everything in Nigeria including law enforcement. A man is caught red handed with his hands in the till – stealing. The moment the law enforcement agents arrest him and begin to prosecute him tribalism comes in. If the arresting authority is headed by a person of a different tribe than that of the accused person you begin to hear funny insinuations that the accused is being â€œvictimizedâ€ because he is a native of :Xâ€ tribe.
The real issues are relegated. Did the man steal or did he not? Another ridiculous version of this tribal defence to breaking our laws is for the accused or his paid spin doctors to aver that many other people from Tribe â€œAâ€ have committed the same offence so why is this present accused personÂ from Tribe â€œBâ€ being â€œharassedâ€ for committing the same offence. I have even heard of another even more ridiculous version of this crazy defence. They tell you that if the people can be stealing in Abuja, why should anyoneÂ harass â€œour industrious son of the soilâ€ from grabbing wealth which God has given us?
Kidnapping, arson, vandalisation of Government property and terrorism for example are crimes in Nigerian Statute books. These offences are vigorously prosecuted by law enforcement agents in most parts of the country safe for a few parts where we have some how come to a conclusion that, the alleged neglect of those areas by the Government over the years is an excuse to commit the said crimes.
At the end of the day when these tribal defences to breaking our law are raised to deafening crescendos the charges are usually quietly dropped or left in abeyanceâ€¦ and soon thereafter the accused person is left off the hook to go and enjoy the fruits of his crime. The unwritten rule in Nigeria as far as our laws are concerned is thisÂ â€œA law is only a law to be obeyed or supported when it is not being enforced against me or people from my tribeâ€Â How can a nation ever proceed this way?
The recent order by the Central Bank of Nigeria sacking the Managing Directors and Executive Directors of 5 banks has again brought to the fore the menace of this undesired defence of tribalism against charges of infraction of the laws of our land. Long before he appointment of Lamido Sanusi as Governor of Central Bank there have been very loud rumors that all was not well in our banking halls.
The very fact that so soon after achieving the mega bank status of raising N25 billion share capital many of these banks kept going back to the stock market to raise fresh funds to us the laymen seems to indicate that there was some forms of liquidity squeeze in the banks. But our fears were doused by the so called finance and economic gurus who told us that our banks were some of the strongest in the world.
Before we could say â€œjackâ€Â our mega banks were winning all sorts of acclaim from all sorts of organizations in the world. The awards ranged from the sublime to the ridiculous.Â â€œThe happiest Bank in Africaâ€, â€œThe Most Promising Bankâ€ â€œThe most improved bankâ€ â€œthe most capitalized bankâ€ e.t.c. These awards from over the seas were pointed to as evidence of the facts that our banks had arrived at the core of the global economic stage.
The next phase of the window dressing started with our banks opening branches in London or New York and in almost every English speaking West African Country, how can we now say that banks that have world wide branch networks were not strong? Also as part of the show of strength the banks began to fight to overdo themselves as to who was the most active in the Margin Trade facility market. This entailed lending depositorsâ€™ money to capital market speculators. A very risky economic activity if there ever was one. These banks under the relevant banking laws were expected to be manned by well paid and experienced professionals who are supposed to include adept risk managers, yet they plunged headlong into these risky ventures without any cover as demanded by our Laws?
By the time Sanusi took office as CBN governor it was clear that the situation in the banks were getting to crises stage. Many of the banks had put in place desperate cost cutting measures like pay cuts for staff, basing full monthly salary payment to staff on performance. There were rumpurs that the former CBN Governor had opened secret lending windows for some of these banks to buoy their liquidity. These rumours were confirmed by the new CBN Governor in his speech when he revealed that many banks wereÂ â€œâ€¦given financial support by the Central Bank of Nigeria (CBN) in the form of an â€œExpanded Discount Windowâ€ (EDW) whereby the CBN extended credit facilities to these banks on the basis of collateral in the form of Commercial Paper and Bankersâ€™ acceptances, sometimes of doubtful value…â€
The question no one is asking is what happened to all the billions that were raised by these banks on the stock market?Â Why did they engage in such reckless uncollateralized or inadequately collateralized lending? Was it deliberate or were they simply incompetent? These are the questions which our laws allow the Central Bank of Nigeria as regulators of the banking sector to ask! And under the provisions of the law the CBN decided to conduct an audit into the banks and following theirÂ findings the reasons for the action of the CBN for sacking the 5 MDs was stated thus :
1. Excessively high level of non-performing loans in the five banks which was attributable 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.
2. The total loan portfolio of these banks was N2,801.92 billion. Margin loans amounted to N456.28 billion and exposure to Oil and Gas was N487.02 billion. Aggregate non-performing loans stood at N143 billion representing 40.81 per cent.
3. From the first two findings, it is evident that the five banks accounted for a disproportionate component of the total exposure to Capital Market and Oil ad Gas, thus reflecting heavy concentration to high risk areas relative to other banks in the industry.
4. The huge provisioning requirements, have led to significant capital impairment. Consequently, all the banks are undercapitalized for their current levels of operations and are required to increase their provisions for loan losses, which impacted negatively on their capital. Indeed one is technically insolvent with a Capital Adequacy Ratio of (1.01 per cent). Thus, a minimum capital injection of N204.94 billion will be required in the five banks to meet the minimum capital adequacy ratio of 10per cent.
5. The five banks were either perennial net-takers of funds in the inter-bank market or enjoyed liquidity support from the CBN for long period of time, a clear evidence of illiquidity. In other words, these banks were unable to meet their obligations as they fall due without resorting to the CBN or the inter-bank market. As a matter of fact, the outstanding balance on the EDW of the five banks amounted to N127.85 billion by end July 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 24per cent as at May 31, 2009. (Regulatory minimum is 25 per cent). Having made the above discoveries the CBN Governor under the in exercise of his powers as contained in Sections 33 and 35 of the Banks and Other Financial Institutions Act 1991, as amended, and after securing the consent of the Board of directors of the CBN, removed the Managing Directors (MDs) and the Executive Directors (EDs) of the said 5 banks. With from office with effect from Friday, August 14, 2009.
In any other country that would have been a straight forward exercise of powers granted a government official under the law but not in our country. Soon there were a buzz of rumours all over the places both in public and in private that this was part of a grand alliance by Northerners to seize control of banks owned by Southerners! And these argument are being bandied by otherwise educated and very exposed people which make the situation even more pitiable.
One reason why people make such puerile tribal arguments is because they do not know the details of laws governing companies in Nigeria.Â Â Under Nigerian Company Law once a company is incorporated it acquires a different personality from those of the persons that founded the company. This is all the more practical with companies that have become Public Limited Companies(PLC) or have been quoted on the stock exchange. So the concept of taking over a personsâ€™ company does not arise at all in law.
Once a company becomes a PLC and is quoted on the stock exchange itâ€™s ownership becomes very fluid. Even if the company were formed by people from Outer Mongolia, due to activities in the stock exchange you may suddenly wake up to find out that the ownership now lies in the hands of people from Falkland Islands or Nigeria. So talking about banks owned by â€œSouthernersâ€ or â€œNorthernersâ€ in a new 21st global economy is rather funny.
And where the sack or takeover of a bank or company is as a result of infraction of the laws or negligent management as was the case in the United States, the owners of the company can scarcely be heard to be complaining that â€œtheirâ€ banks have been taken away from them to be given to people from outer Mongolia.
The more unproductive option which is also allowed under our laws is for the Government to sit back and allow the companies(Banks) to collapse then they come in as liquidators and whatever the amount of your deposit you get N100,000 as compensation. This option chosen by the CBN seems to be better in my opinion.
They are pumping fresh cash into the banks to shore up their positions- and of course in that kind of scenario, the same management which was responsible for mis-managing the bank in the first place cannot also be allowed to administer the funds being pumped in by the government? It also suffices to say that what has happened in the recent CBN action is a mere change in management not ownership.
I didnâ€™t read anything in the CBN statement which said that any shares in these banks should be forfeited. Under the 1990 Companies and Allied matters Act which governs companies in Nigeria ownership of companies lie in the hands of the shareholders and not the Management-thus a person with majority share holding may not be involved in the day to day running of the company.
And In this type of situation where it has been found out thorough Audit exercise that the management of a bank had run the banks in a way that put both the investors and depositors funds at risk, should those persons still be left in charge of such companies?â€™
The CBN has made it very easy for the sacked MDâ€™s to go to court to challenge the CBNâ€™s action by stating clearly the reasons why the MDs needed to be sacked thus if any of these people feel that any on those reasons stated ware not prerequites for their sack under the law or that the CBN has no such powers under the law to sack them they can easily go to court.
If we keep up this trivial tribal defence of alleged infractions of our laws then nobody (especially the very rich or influential citizens of Nigeria) would ever get punished for infractions of our laws. And thus our laws would become irrelevant and we all know what happens to lawless nations.