Sobowale On Business

September 26, 2016

Skye Bank as a metaphor for banking in Nigeria

Skye Bank as a metaphor for banking in Nigeria

Chairman, Dr. Olatunde Ayeni, and Managing Director/Chief Executive Officer, Mr. Timothy Oguntayo

By Dele Sobowale

“Diezani’s ally, Omokore returns N200m to govt.” PUNCH, September 18, 2016, p 1.

LAST month, when the Central Bank of Nigeria took out advertisements in several national newspapers to disclaim the “rumour” that Skye Bank was not distressed, an article appeared on this page titled WHY CBN AND LAGOS STATE MIGHT FAIL IN THEIR EFFORT TO SAVE SKYE BANK.

In it, the point was made that contrary to the position of the CBN and despite the vital interest of Lagos State in saving the bank, the efforts might end in failure because the bank had been undermined by its directors and managers in many ways, not just financial, which will make any rescue effort difficult – if not impossible. By then a compilation of the list of cases heading for the courts and involving the bank had been made. It was frightening to observe how one bank could have so got itself involved in so many shady deals.

In fact, the current cases involving the bank and Mrs Jonathan is a throw-back to banking in the late 1990s. Writing in 2004 in an article titled BANKING: LEGALISED ROBBERY OR SWINDLE IN NIGERIA, the point had been made that despite the Failed Bank Decree of 1997/8 under which many Nigerian bankers were arrested by the Abacha administration, Nigerian bankers had soon returned to their tricks which led to their being described as “robbers in designer suits”.

Since then, hardly would six years elapse before another banking crisis is experienced in this country. The peculiar case of Skye Bank should not be regarded as an exception. Rather, it should be a wake-up call to the CBN that all might not be well with the sector. In over twenty years of observing the sector, one lesson has been learnt borrowing from the life of cockroaches. By the time you see a cockroach in your house, you can be sure there are several hundreds in the crevices. The same is true with banking. By the time a bank is caught in a trap, others are also in.

Given the steady drip of money alleged to have been returned to the Federal Government by several individuals and organizations, since the Economic and Financial Crimes Commission, EFCC, started probing various transactions last year, the return of N200 million should not prove so startling.

What made the report very significant was the name of the bank and the fact that eight accounts traced to the same person at the bank had been frozen in connection with alleged fraudulent deals involving him and the Nigerian National Petroleum Corporation.

The same bank is currently at the centre of probes into alleged shady accounts involving the wife of former President Jonathan – Mrs Patience Jonathan. Close to $30 million is supposed to be frozen in that alleged scam.  Prior to that, virtually all the funds supposed to have been distributed by Mrs Alison-Madueke, the former Minister of Petroleum Resources, passed through the same bank. In fact a comprehensive tally of all the individuals and organizations so far touched by the EFCC would reveal at least twenty whose accounts at the Skye Bank had been frozen.

The amount involved will run into billions and the banks role in some of these deals could eventually cost millions of naira in penalties. In too many cases the officials of the bank deliberately violated all the sacred principles of professional banking. Deposits which should have been reported to the Central Bank and security agencies, routinely as required by regulations were not and the bank lent itself as a willing tool to those seeking to circumvent the laws of Nigeria.

Apart from its involvement in the messy deals involving “yesterday’s powerful people”, it had other issues to grapple with. Within weeks of the removal of the former board of directors and the appointment of a new one and the infusion of funds from the CBN, the bank was among the eight tossed out of the foreign exchange market for withholding $221 million Treasury Single Account, TSA, funds and ordered to pay immediately. Granted, the CBN later soft pedaled on the measure. But, the fact remains that $221 million or N88.4 billion would have to be raised soon to pay the Federal Government. Skye Bank is not alone in that predicament.

Dollar scarcity is savaging all the banks and as in all of life’s competitive situations, it is becoming a matter of the survival of the fittest. All the other banks which have funds frozen on account of involvement in questionable transactions face possible penalties – if not for anything else but for collusion in money laundering operations and failure to alert the regulatory authorities. Virtually all of them are exposed to the oil and gas, airlines, power companies and real estate sectors and the huge non-performing loans that have accumulated from those ventures.

All are seating on assets worth billions of naira which they have seized from debtors but there are no buyers in sight. Entire estates are up for grabs in Lagos, Abuja, Portharcourt, Kaduna etc.It is safe bet that the cases heading for the courts from the EFCC alone will add more assets to the glut and no buyers. One bank manager disclosed that his bank is now afraid to press for liquidation because the assets on hand cannot be disposed of even at give-away prices.

As if that is not depressing enough, AMCON also holds billions of naira worth of properties, turned over by the banks with little hope of getting rid of them.

Finally, the real threat to Nigerian banks is the recession caused mainly by dollar scarcity – caused by low crude oil price. From all indications, the global glut will continue through 2017 because countries like Iran and Libya which had exported little in 2013-2015 are back in the market and they need all the dollars they can get – even if it means discounting the oil price. The outlook for a price increase appears bleak.

So where will the dollars come from to repay what is owed to TSA and pay fines?