By Eghes Eyieyien

I was a guest on Channels TV’s programme, SUNRISE, on Saturday, 13th August, 2011, as an analyst invited to discuss the recent nationalisation of Afribank (Mainstreet Bank), BankPHB (Keystone Bank) and Spring Bank (Enterprise Bank). Also on the programme was Mr. Mustapha Chike-Obi, the Managing Director and Chief Executive Officer of Asset Management Corporation of Nigeria (AMCON), which now owns the banks despite the pending court cases filed by the banks’ shareholders against the Central Bank of Nigeria (CBN) regarding the 2009 take-over of the banks. In other climes the banking supervisors would have refrained from taking steps which were clearly subjudice and in contempt of the Courts.

My encounter with Mr. Mustapha Chike-Obi was yet another experience that underscored for me the fact that many Nigerians in high public office apparently think Nigerians are simple-minded and that they can play on our collective intelligence ALL THE TIME!

It appears to me that, despite his professional pedigree which I respect tremendously, the AMCON MD may not as yet have fully familiarised himself with the Nigeria banking legal and regulatory environment. From my discussions with him, he obviously did not realise that the Nigeria Deposit Insurance Corporation (NDIC) is actually the only government agency empowered by law (Sections 38 and 39 of the NDIC Act 2006) to do what AMCON is being asked to do. Rather than face its primary objective of managing the non-performing assets of failed and failing banks it is being led by the CBN/NDIC on a misadventure which it has no competence or experience to handle.

In the course of the programme and in response to his assertion that AMCON had been “very thorough” in the way it has gone about appointing the new management teams, I raised the issue that the evidence was to the contrary and cited the appointment as an Executive Director of an ex-staff of Nigeria International Bank (now Citibank Nigeria) who committed a fraud in 1991 and was sacked by the bank. I refrained from mentioning the person’s name. Chike-Obi’s response was to say AMCON “is not perfect” and that “it was a mistake”. To his credit, he owned up to the blunder and offered apologies to the nation there on live television.

If AMCON could make that kind of blunder about an issue as simple as the appointment of credible Executive Directors and its MD/CEO was compelled to acknowledge error and apologise to Nigerians on national television, then what other “mistakes” might have already been made but of which we are yet unaware?

We have real problems in the banking industry and the CBN, NDIC and AMCON are clearly not on top of their game in addressing them. The statutory functions of NDIC and AMCON are very explicit. AMCON is not the agency saddled with the power to “own” a failed bank; that is NDIC’s role which is spelt out in Sections 38 and 39 of the NDIC Act 2006. The NDIC set up bridge banks on Friday, 5th August, 2011, and “sold” them to AMCON on Saturday, 6th August, 2011. The following day, AMCON announced new management teams and even released the new bank logos. What uncommon surgical efficiency! What was the haste all about? Why intervene 50 clear days before your self-imposed dead-line? What was the hurry for? Could the CBN and NDIC not have waited just ten more days for the new Minister of Finance, Dr. Ngozi Okonjo-Iweala, to assume office and make an input into the decision-making process? Why the enormous effort to present her with a fait accompli?

NDIC can operate a bridge bank for up to FIVE years per Section 39 of its Act. What magic is AMCON going to perform which NDIC is unable or incompetent to do? NDIC would not have had to inject N678.5Billion into the banks as “Share Capital to achieve 15 per cent Capital Adequacy Ratio” because the law says a bridge bank needs no Share Capital. All NDIC would have done is provide liquidity by way of 90-day “Accommodation Bills” which it is empowered by law to issue as “Financial Assistance” to the banks which is one of its fundamental functions.

Chike-Obi said during the programme that AMCON had already sourced fifteen investors who wish to acquire the three banks. What a miracle!! Within just seven days of its acquisition of the bridge banks, which the NDIC Managing Director, Alhaji Umaru Ibrahim, told Nigerians on NTA News just about five days earlier had no chance of being recapitalised before the CBN dead-line of 30th September, 2011, and that the CBN/NDIC acted seven clear weeks before the time-line because by end-September the banks would be “more than dead”.  The NDIC should then have had no problem negotiating with the “AMCON Fifteen Investors” to buy off the banks from it directly. That route would have been the cheaper, more transparent, credible, efficient and legal way to resolve the three failed banks’ affairs.

To date, the CBN and AMCON have doled out N1, 298,500,000,000 (One Trillion, two hundred and ninety-eight Billion, and five hundred Million Naira only!! to salvage the eight banks it took over in 2009. Is Nigeria so much in need of what to do with money again as it was during the Oil Boom years of the early 1970s such that spending N1.3Trillion to save eight banks has become inconsequential? Is the cost-benefit analysis of a failure resolution option no longer relevant in choosing the most viable path of action which makes the best economic/financial sense? Are we not operating a free market economy where the principle of “Free Entry and Free Exit” holds sway? This latest injection of N678.5Billion into the three nationalised banks is an unnecessary waste of funds since the NDIC could have statutorily managed them as bridge banks without them needing to have any Share Capital and NDIC would only provide them temporary liquidity support until they are sold to new owners.

Why the opacity of the CBN in its handling of the acquisition bids for the three banks just nationalised. Particularly curious is the case of Afribank which had signed a Memorandum of Understanding with Vine Capital Partners Ltd. led by Mr. Tosayee Ogbomo, who resigned as a divisional Managing Director of Goldman Sachs, New York, to pursue the Afribank acquisition transaction. Dr. Kingsley Moghalu, CBN’s Deputy Governor, Financial System Stability, was reported about three weeks ago to have said: “We have information you don’t have. It is not a matter of proving beyond reasonable doubt. It is based on the judgment of the regulator. The record of the proposed investor did not go well. There was an attempt by the proposed investor to acquire two banks. From the point of view of financial systems stability, we will not approve one party taking control of two banks, especially two intervened banks by a party that has not demonstrated a track record of managing a commercial bank”.

My sources told me that the CBN was suspicious of a possible relationship between Mr. Ogbomo and the erstwhile Chairman of Afribank, Chief Osa Osunde, especially since they are both Bini from Edo State. The CBN was also said to be concerned that an Adviser to Vine Capital Partners, Constant Capital which has Cally Udalor as the Principal, had done some repurchase deals with Afribank (among other banks) in the past which it frowned at. But, surprisingly, the CBN as at 5th August, 2011, when it withdrew Afribank’s banking licence had not even written Vine Capital Partners to explain why it voided the MOU.

The question is what led the CBN to conclude that the folks at Vine Capital Partners were apparently not “Fit and Proper Persons”? One of the abuses I have seen on the part of the CBN over the years when banks are being licensed or acquisition transactions are being done in the industry is the issue of deciding whether the prospective investors are “Fit and Proper” persons. The CBN decides if people are “fit and proper” in such a subjective and opaque manner that it appears one’s face alone could disqualify one! Yet we have seen many cases where people who were known treasury looters, fronts for politically exposed persons and even 419ners being approved as significant shareholders in banks. If the CBN were sincere about these matters, why has it found it convenient to retain as its acquisition advisers persons whose interests clearly conflict?

The CBN Governor has done some commendable things since being appointed to the office in 2009. For instance, the take-over of the eight banks in 2009 and the injection of funds then were steps in the right direction. I also applaud him for the enforcement of the CBN Code of Conduct for banks which Prof. Chukwuma Soludo merely paid lip-service to as Governor; the issuance of the new Prudential Guidelines for Loan-loss Provisioning and the creation of the bail-out fund for the real sector were other commendable steps he took.