With Omoh Gabriel
When on March 23, 2009 Vanguard carried a report that anti-consolidation forces were regrouping to reverse the gains made by the banking industry, many dismissed the report.
But when on August 14, 2009, Sanusi Lamido Sanusi announced his radical intervention into the banking system by removing with fanfare the executives of ailing banks; many Nigerians returned to the report and started circulating it. The report was written before the appointment of Sanusi Lamido Sanusi.
Developments in the financial sector in the last two weeks have confirmed the veracityof the Vanguard report. Vanguard has nothing personal against the CBN or its Governor but that what is right should be done to make the economy better for all.
If the CBN had taken Vanguard’s report seriously, it would not have found itself in the mess it is now as it was gathered last week from the usual reliable sources, that the management of the apex bank is looking for a way round the logjam secretly and has started consultations through third parties.
Looking back, the report had said: “Anti-consolidation forces have regrouped with the hope of dissembling the banks and forcing a take-over of the top five banks in the country, Vanguard can now reveal.
The grand plan by the group is to cause panic and uncertainty in the industry and make the target banks look unsafe for depositors. Their aim, Vanguard gathered, is to cause loss of public confidence in the banking industry and compel the Federal Government to move in by injecting funds. Further, they ultimately plan to instigate government to take equity holdings in the targeted banks.
Vanguard investigations revealed that 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 geo-political zones in the country who felt left out in the consolidation exercise.”
The group’s second game plan is to make Nigerian banks look unsafe in the eyes of the banking public. They have perfected their game by spreading rumour that some categories of banks are unsound and are on the verge of collapse.”
Two years down the line, the CBN management has not found a lasting solution to the Nigerian banking crisis, rather, by its continued inconsistencies in policy pronouncement, the much needed confidence in the system is completely eroded.
By causing panic, those behind the banking crisis have made the eight rescued banks seem so worthless that nobody is ready to put his hard earned money into them. The CBN has seems to be aiding them by pronouncements.
The apex bank took two full pages in the print media to show that the eight rescued banks were worthless and that if they did not recapitalise by September 30, it will be left with no choice but liquidate them. If this is not causing panic in the system, let someone tell me what panic is.
Take a sample survey of the banking public, all you will hear is which bank is safe now? Erosion of public confidence is the order of the day. The CBN in an attempt to correct its mistake has staked uncertainty to the whole issue. It will no longer liquidate the banks after September 30th deadline for recapitalisation but will nationalise.
The CBN by it own admission had reasoned that the option available to it was either to withdraw the licence of the banks and ask the financial undertaker, NDIC, to move in and liquidate the banks. Both options were dropped because of the implications for the economy.
The CBN had told the world that nationalising the banks would have taken the nation back to the 1980s when the public sector owned substantial shares in banks and caused distress in the system as a result of non-performing loans.
For the CBN to now come up with the same option it earlier told the world or considered not feasible is to say the least, a mark of confusion and a sign of lack of depth in the thinking and policy formulation at the CBN. This is dangerous for an economy that is seeking transformation.
The CBN is an important arm of the government that statements and pronouncement from it is taken seriously in financial and economic circles. As it is, no serious-minded person will take the CBN words for it because down the line, it will have cause to change its mind This is what the former Minister of State for Finance, Mr. Remi Babalola described as ‘policy as the spirit leads’.
Those who had backed the CBN in its reform agenda have abandoned it. It is simply groping in the dark not knowing what to do with the rescued banks, giving credence to the fact that those who hatched the plan may have left the CBN leadership in the cold.
As it stands, the CBN has run out of ideas on how to resolve the banking crisis. All it should have done in the first instance was to ask the shareholders of these banks within a given time frame to recapitalise even if those indicted for wrong doings were excluded from the exercise.
The right of first refusal if given to the shareholders would have stood the CBN out as fair and just. The failure to apply this principle under the guise that banking license is a privilege has prolonged the resolution of the crisis.
With the lesson from Savannah Bank license revocation still fresh in the minds of Nigerians and the subsequent victory of the shareholders in court, it will be good and better for all Nigerians to sink their differences in this matter and hold a stakeholders’ meeting to agree on the formula for the recapitalisation of the rescued banks.
The curious thing is that the rescued banks have a combined deposit of N3.06 trillion as at 2010 which is a source of worry to the CBN management that should the eight banks go under, the economy will not be able to absorb the loss nor is the Federal Government in any position to pay depositors.
The Nigeria Deposit Insurance Corporation has provision for protecting small depositors and can only pay a maximum of N250, 000 per depositor.
The CBN leadership should consider resigning their appointment for failure to resolve the banking crisis, keep quiet and let confidence return to the system, or allow shareholders recapitalise their banks instead of the present roller coaster he is doing with the economy.
The expectation of the ordinary Nigerian was that after the Sanusi tsunami, the banks will be disposed to lending. Almost two years down the line, the situation is worse than when the CBN intervened in the system. Almost all the branch managers of banks across the country have suddenly become risk managers. No one is ready to finance any project.
One of the banks’ branch managers last week owned up to the fact that the role of banks as financial intermediary has been put on hold in Nigeria in the last one and a half years. No bank manager is ready to stick out his neck or job in the name of granting facility.
All projects have become risky and as a result, projects that should ordinarily get bank support are brushed aside thus aggravating the unemployment situation in the country.