By Dele Sobowale

“The climax of every tragedy lies in the deafness of its heroes”. Albert Camus, 1903-1960. (VANGUARD BOOK OF QUOTATIONS p 90).

It is inconceivable that the Federal Minister of Finance and team leader of the National Economic Management Team, would imagine that she can succeed with her assignment without a strong banking sector behind her. Well, for whatever it is worth, she left us, in 2006, with Union Bank Plc, the second oldest bank in the country calling itself BIG STRONG RELIABLE; and it was.

Today, it would amount to generous praise to call it SMALL WEAK UNRELIABLE. For a while, the bank all but disappeared – right in front of our eyes. The fate of Union summarises all that the Minister needs to know about the sort of support she can expect from that financial graveyard.

HOW IT ALL BEGAN

The banking sector was moving steadily along under various leaders until 2004 when the last of the conservative Governors of Central Bank of Nigeria, CBN, Chief Joseph Sanusi, had to go. He, like others before him, had several years of banking experience to his credit and as the former Managing Director of the First Bank, had a hands-on feel for what went on in the sector. Under him, the sector grew, but not spectacularly. Banks quoted on the Nigerian Stock Exchange increased in number – but they did not dominate the Exchange.

All those were soon to change. As Sanusi’s tenure drew to a close, there was widespread speculation regarding who would be his successor. Few, if any ever thought a non-banker, an academic economist, with no previous experience managing large departments or agencies, would be tapped for the job.

Why President Olusegun Obasanjo chose Professor Charles (at the time) now Chukwumah Soludo for the job will probably remain a mystery for all time – especially after the experiment had backfired so disastrously. However, if as US Congressman Brademas, has informed us, “Leadership is often somewhat mysterious. Leadership can be summed up in two words: intelligence and integrity, or to use two synonyms, competence and character”. (VANGUARD BOOK OF QUOTATIONS p 125) then Professor Soludo ranks extremely high on intelligence bordering on genius – in his chosen field of economics. We will not touch on character or integrity –despite the temptation.

His curriculum vitae informed us that he was the best graduating student in secondary school; the best graduating undergraduate; the best graduate for the Master’s degree and the best Doctorate degree recipient – all at the University of Nigeria, Nsukka. He later became the youngest professor appointed in the University’s history.

Even if you snort that UNN is not quite Harvard or Cambridge, one must admit that it takes a rare breed of intellect to achieve all those feats in any setting. And, you only have to be with Soludo for ten minutes before coming to the conclusion that you have indeed met a first class mind.

Prior to his appointment as Central Bank governor, he had been appointed as the Chief Economic Adviser, CEA, to the President – quite a feat for someone not yet 40. As CEA, he had proceeded to lead a team of technocrats (whatever happened to those people; they just disappeared from the national scene) to produce a glossy National Economic Empowerment and Development Strategy, NEEDS I, document. Some, including this writer, thought the NEEDS I document was more theoretical than practical and that it might never be succeeded by NEEDS II as promised.

Predictably, everybody, but busy-body Area Boys, have forgotten about NEEDS I; and there will be no NEEDS II. So much for long-term National Plans because right now, we are discussing another one. There would have been no need (pardon the pun) for NTFF if NEEDS had worked. But, it was another failed attempt; now consigned to the dustbin of our economic history.

Whatever else NEEDS I failed to achieve, it succeeded in bringing its chief author, Professor Soludo, to the attention of a President who wanted to break new ground in many directions. The cast of his administration for the second term was going to include the brightest and best young minds in Nigeria and the diaspora. So, like the great tide which brings a lot of stuff, Professor Soludo was thrown up as the Governor of Central Bank; the first academic economist to reach the post since it was created by the British.

Not one to suffer “fools” gladly, the young CBN governor decided to embark on rapid innovation which will propel the country to the forefront of economic powers globally; and undoubtedly, Soludo saw himself as a potential combination of George Marshall, 1880-1959, the US Secretary of State who developed the Marshall Plan for the economic recovery of Europe after World War II and Conrad Adenauer, 1876-1967, the German Chancellor who planned Germany’s own economic resurrection.

Painstakingly, he developed the banking consolidation plan and everything looked great on paper. Soludo would have certainly become one of the greatest Nigerians who ever lived – if it had worked. But like NEEDS I, his banking plan; dubbed BANKING CONSOLIDATION, failed miserably and today, the nation is still picking up the pieces of the wreckage left behind by the “Boy-Wonder of UNN.”

BLACK FRIDAY –THE BEGINNING OF A SHORT-LIVED DREAM

July 8, 2004, was a Friday; but it turned out to be a Friday which will long be remembered in the nation’s banking history as Black Friday. Bankers had been summoned to Abuja by the new CBN governor – for what everyone assumed (although there were rumours later that some had previous warning) would be routine meeting. Instead, a new banking policy was announced by the CBN governor.

By December 31, 2005, the minimum paid up capital for any bank operating in Nigeria would be N25 billion. As one of the participants said later, “the silence was deafening.” Hearts started beating at the fastest rate some could remember; those with previous cases of high blood pressure had to dash out to swallow drugs. Black Friday was here for bankers; and at the same time, for all Nigerians and foreigners as well. Nothing would ever be the same again.

When question time came, every suggestion – to create at least two classes of banks (big and small), to give more time etc – was dismissed with a derisive wave of the hand. An ultimatum had been issued to bankers –TAKE IT OR GET LOST. Few, and possibly none, had the stomach for the lunch that was served. The flights back to Lagos and elsewhere must have been the longest any of them ever took.

The strategic thrust of Consolidation was BIGNESS; the aim was to create domestic banks with the financial muscle to compete globally. And N25 billion, it was made clear, was just the starting point – not the destination. Underlying that strategic thrust were two firm beliefs.

The first advanced that bigness protected banks against failure. The second assumed that bankers who had built up paid-up capital of less than N10 billion over ten to twenty years will be able to cope with larger responsibilities. As it turned out, the two assumptions proved to be false. Soludo had built several “Titanics” that sank on first voyage.

Meanwhile, after stunning the bankers, the CBN governor took the show to the road – because Soludo was the first show-man who became CBN governor. He was a powerful entertainer; has a voice which romances the listeners and knew how to use the media.

Within months, the CBN governor’s picture on the front page would guarantee papers a sell-out. He spoke with over-confidence, like the poker player holding all the aces. Despite initial opposition, he had his way. On January 2006, about 24 banks had cleared the hurdle to operate in Nigeria.

The rest were left to lick their wounds. The global financial community was stunned. For the first time in memory, a Nigerian official had made a tough promise and had delivered. His place in the pantheon of Nigerian heroes was assured – or so it seemed at the time. Nobody could have foreseen the tragedy that would follow.

WHAT WENT WRONG?

“From the sublime to the ridiculous, there is only one step.”

Napoleon Bonaparte, 1769-1821.

Before long, Soludo and the successful banks took too many steps leading to disaster. To start with, bigness for its own sake became prevalent and Soludo encouraged it because it was important for him to see Nigerian banks listed among the biggest in the world. They sucked in every bit of capital in the market while building their own versions of a Ponzi scheme. By 2007, the line separating the legalised banks and “Wonder banks” was a slim one.

In the end, the banks became too big for their managers to handle and all of them became totally corrupted. Below, a list of selected banks is presented with their paid-up capital on the eve of consolidation, as well as their share prices. Later, another chart will show the rapid rise and the sudden fall of the banks till today.

Now bearing in mind that it had taken First Bank Plc, the very first, over 110 years to reach N35 billion and Union Bank, which started operating as Barclays Bank over 90 years to reach the same milestone, we should all have been seriously worried that other banks with less than half or one third; or even one sixth, of the required N25 billion were given only eighteen months to find the money. Consequently, a mad scramble started with insufficient thought given to what to do with the vastly increased share capital…