By Gabriel OMO, Business Editor
THE Central Bank Governor, Sanusi Lamido Sanusi, yesterday made good his threat to remove banks Managing Director if found wanting.
So he announced the removal from office the Managing Director and Executive Directors of Afribank Plc, Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc and Finbank Plc.
At the press briefing to announce his decision which he said has the backing of the President Umaru Yarâ€™Adua, Sanusi said, â€œI should also state at this point that the scope of the Special Examination was widened to cover all 24 banks. So far, we have concluded the audit of 10 banks including these five, the others being Diamond Bank, First Bank, United Bank for Africa, Guaranty Trust Bank and Sterling Bank. We have also commenced the next batch of 11 banks and hope to conclude them by end of August. All in all, we expect to conclude the audit in mid-September.
â€œThe Central bank is requiring all banks to make appropriate provisioning for non-performing loans and disclose them. We hope that by the end of this quarter, all banks would have cleaned up their Balance Sheets. On the basis of the information available to us so far, we are confident that the banking system is safe and sound and we have dealt with the major sources of systemic risk.â€
If the banking system is safe and sound and the ongoing audit of the remaining banks will end in mid-September, why is Sanusi in a hurry to cause panic in the system?Â Â By this action, he has unwittingly confirmed fears in some quarters that he has a hidden agenda to carry out.
The CBN governor has left one of the sick banks which market operators are saying has some particular regional affiliation untouched and has not by his own admission concluded the audit investigation in all the banks. Besides, the fact that the apex bank has injected N402 billion as tier two capital which will be sold to both local and foreign investors further fuels the fears that the CBN governorâ€™s agenda is unfolding.
Before the appointment of Sanusi as CBN Governor, there were strong indications that anti consolidation forces were regrouping with the hope of dissembling the banks and forcing a take over of the top five banks in the country. The grand plan by the group is to cause panic and uncertainty in the industry and make the target banks look unsafe for depositors, just as it has happened now.
The aim, it was alleged, is to cause loss of public confidence in the banking industry and compel the Federal Government to move in by injecting funds. Observers further said the group ultimately plans to instigate government to take equity holdings in the targeted banks as Sanusi has announced.
Vanguard on its front page report early in the year had revealed thatÂ the group at work is made up of former bank owners who lost out during the consolidation exercise, a powerful clique in the present government, and some aggrieved persons in three of the six geopolitical zones in the country who felt left out in the consolidation exercise.
Presidency sources at the time disclosed that those who felt left out in the consolidation exercise are grieved and are up in arms to recoup what they felt they lost during the Obasanjo years.
Part of the plan hatched by the group which has played out was said to be to ensure that the former Central Bank governor, Professor Charles Soludo, did not get a second term. The plan, the source went on, was also to ensure that whatever gains that consolidation had was to be discredited.
This it was learnt was meant to force the President to act quickly in the appointment of a successor to Soludo as they anticipated that the presidentâ€™s slow move may scuttle their dreams and cause the renewal of Soludo appointment for a second term which they achieved with ease.
The groupâ€™s second game plan is said to make Nigerian banks look unsafe in the eye of the banking public. It is said that they have perfected their game by spreading rumours that some categories of banks are unsound and are on the verge of collapse.
â€œThey sent out text messages to individuals and account holders passing wrong information on their target banks.Â At the time, the groupâ€™s target was one of the high flying new generation banks where they have sent out several messages.
One of the text messages which one of the operators gave to Vanguard stated â€œ— one of Nigeriaâ€™s high-flying banks is facing serious difficulties that could force it into liquidation before the end of 2009. The bankâ€™s precarious situation is due to its huge exposure to toxic loans to stockbrokers and importers of petroleum products.â€
Unfortunately for the CBN, the very bank in question at the time Intercontinental Bank is affected by the CBN pronouncement. There is certainly not anything anyone will tell the staff and shareholders of Intercontinental Bank that the CBN action was not pre-meditated and targeted at it.
Sanusi admitted that changing the bank management was not enough guaranty for the sound management of the affected banks for he said,Â â€œWe are conscious of the fact that changing management alone will not resolve this problem. Consequently, the CBN is injecting a total of about N400 billion into these five banks with immediate effect in form of Tier 2 Capital to be repaid from proceeds of capitalization in the near future.
This injection is sufficient to resolve and stabilise all the institutions and enable them continue normal business. The injection of fresh capital by the CBN is a temporary measure as government does not intend to hold the shares for long and shall divest its holdings as soon as new investors recapitalize these banks.
Curiously Sanusi failed to say how long the interim management will stay in the affected banks and when new investors will be called in to recapitalise the five banks. He did not say what conditions the new investors will fulfil and what mode the recapitalisation will take.
Sanusi admitted that banking problems were not peculiar to Nigeria at this time for he said, â€œAs we are all aware, the world economy has been hit by the repercussion of the financial meltdown that started with the sub-prime mortgage crisis in the United States of America and spread to Europe and other parts of the World.
This crisis has led to the collapse of many banks and other financial institutions, and even rendered an entire nation bankrupt, in Nigeria, the banking system appears to have weathered the storm due to a number of factors. Among these are the facts that our financial system is not strongly integrated into the International Financial System, as well as the relatively simple nature of financial products and strong capitalisation and liquidity of Nigerian banks.â€
However, there are many who have been aware for a while now that whereas the system in general is likely to absorb and survive the effects of crisis, the effects vary from bank to bank. A few Nigerian banks, mainly due to huge concentrations in their exposure to certain sectors (Capital Market and Oil and Gas being the prominent ones), but due to a general weakness in risk management and corporate governance, have continued to display signs of failure.
Consequently, having reviewed all the reports of the examiners and the comments of the Directors and Deputy Governors, I am satisfied that these five institutions are in a grave situation and that their Management have acted in a manner detrimental to the interest of their depositors and creditors.
Therefore, in exercise of my 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, I hereby remove the Managing Directors and the Executive Directors of the following banks from office with effect from Friday, August 14, 2009. affected banks: Mr. John Aboh – MD/CEO Oceanic International Bank Plc; Mr. Mahmud L. Alabi- MD/CEO Intercontinental Bank Plc; Mr. Nebolisa Arah – MD/CEO Afribank Plc; Mrs. Suzanne Iroche- MD/CEO Finbank Plc; Mrs. Funke Osibodu – MD/CEO Union Bank Plc.
Each of the above will head a management team that will include Executive Directors and Chief Financial Officers to be appointed by the CBN. This team is tasked with continuing the businesses of the banks as a going concern. I therefore appeal to the Boards of the affected banks, in their own interest, to cooperate with the newly appointed Executive Management.
â€œI will conclude by restating that,going forward, the CBN will not waiver in its desire to ensure that public confidence in the Nigerian banking system is maintained through appropriate disclosures and the reinvigoration of its policy of zero tolerance on all professional and unethical conducts. We will not allow any bank to fail.
However, we will also ensure that officers of banks and debtors who contribute to bank failures are brought to book to the full extent of the law and that all proceeds of infraction are confiscated where legally feasibleâ€. The CBN governor is not done yet in the next few months he will release the next phase of his agenda.
The big question is can the Nigeria financial system stand the stress of some spending their life time to build institution while others idle away only to surface mid stream to take over such institutions? The next few months will give all of us the answer.â€