Banking stocks lose N3.12bn in one week’- SUNDAY PUNCH, page 4.

MY first major article on banks was in 1992; when one Mr Jimi Lawal, was the Managing Director of Alpha Merchant Bank. From the quarterly, semi-annual and annual reports of the bank, anyone could be forgiven for thinking that Mr Lawal, who was also a flashy dresser and certainly not conservative, as traditional bankers were, had his own mint for printing the funds his bank was allegedly making. He was not alone.

Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele

He was soon joined by others who floated merchant banks, financial houses etc – each reporting fantastic profits. Lawal was the most successful with the game they were all playing. So successful was he, that he was one of the key players during the First National Economic Summit Group, NESG, meeting organized by Chief Ernest Shonekan, GCFR, who was Head of Government under President Babangida in 1992.

Lawal was the centre of attention. He had crawled from nowhere, literally, to take Nigerian banking sector by storm.  Sitting in the auditorium at the then, Nicon-Noga-Hilton Hotel, now Transcorp Hotel, only one thought passed through my mind each time the man took the microphone. “Can this man be real?” I returned to the Nigerian Institute of Management, NIM, who sent me to the NESG, determined to find out all I could about the bank.

Operating then, and now, in the belief that “if something is too good to be true, it is probably not true”, I went to work. But, I soon found myself looking into other banks as well. The scenario was like this. You bought shares in these banks and, literally, before you reached home a dividend warrant was waiting for you. Or you make a fixed deposit and you collect your interest upfront. I started reading economics in 1964 as a Freshman in an American university (I still read today) and by 1992 have been at it for twenty-eight years.

There was (and is) only one scheme capable of generating that sort of returns to investors – it is the discredited Ponzi scheme made notorious by an Italian by that name. It had been used to defraud people globally since then. Just last week, the EFCC arrested some of the operators of the scheme in Ibadan – where to the best of my knowledge there are at least four running at any time.

After reading several annual reports and talking discretely to some investors/depositors, I wrote the article titled FUNNY MONEY predicting that the banks were on the verge of collapsing. Just a new contributor to VANGUARD at the time, the article and warnings were roundly ignored –until Alpha Merchant and others were liquidated and Mr Lawal fled abroad. Incidentally, it was Lawal who created the image of bankers as “pen robbers in designer suits” used often on these pages.

The second major intervention came in mid-2008, less than three years after Banking Consolidation. While, Professor Soludo, the Governor of the Central Bank of Nigeria, CBN, and the Director General of the Nigerian Stock Exchange, Dr Ndidi Oyuike, were telling Nigerian stockholders to hang on to their shares, that the banks were fundamentally sound, I not only wrote that people should get out, I got out myself by flogging off virtually all my OCEANIC BANK shares at N28 per share and waited for the recovery which the CBN Governor and DG-NSE promised to occur. It is doubtful if anyone over forty will ever live to see First Bank at N50 per share again. OCEANIC and INTERCONTINENTAL are gone for ever.

The CBN never advised small investors or depositors of these banks, correctly in the crisis of the 1990s; it actually deceived them in 2008. The question now is: what role is the CBN playing in preparing depositors and small investors for the 2017/8 bank crisis? It is understandable that the regulatory bank must be anxious not to lose any bank – given how few of them there are now. There were about seventy-three (73) on the eve of consolidation –when shareholders and depositors were told they could go to sleep with their two eyes closed.

The unrelenting drop in share prices, loss of dividends and busted hopes had sent several thousands to permanent sleep. There are now only about twenty banks left and information reaching stakeholders about them are not re-assuring. Once upon a time, the big three – First, Union and UBA – offered security; even if interest rates and dividends were lower than sector average.

When, Union almost joined OCEANIC, INTERCONTINENTAL, BANKPHB in going into oblivion in 2009, it removed the last traces of security that stakeholders could have in any bank. Today rumours have taken over because facts are being hoarded by the CBN. Depositors were not told until SAVANNAH and SOCIETE GENERALE closed their doors on their money.

Until Soludo left, they were not aware that their banks were on drips from CBN on account of toxic loans. As 2016 draws to a close, they have no facts on which to base their decisions. When Bloomberg published a list of banks, said to be in crisis, CBN rose, or attempted to rise, to their defense.

Unfortunately, instead of saving the few, CBN is imperiling all of them. The Stock Market result last week, when bank stocks lost about 60 per cent of value is an indication that CBN has lost a lot of credibility. That is dangerous for all concerned.

Meanwhile, the ban ks themselves are doing very little to help their own cause. They are also hoarding information which can be used to help them. Perhaps they think “silence is golden”. They will soon discover how wrong they are. CBN alone cannot save them.