Shareholders of the three nationalised banks – Afribank (now Mainstreet Bank), Bank PHB (Keystone Bank) and Spring Bank (Enterprise Bank) – are hurt by the sudden takeover of their banks, knowing full well that unless they get relief from the court, whatever they invested may have been lost forever. They are the latest victims of the controversial reforms started in the banking sector by Lamido Sanusi since he assumed office in 2009 as governor of the Central Bank of Nigeria, CBN.
By that action, the CBN governor brought to a new milestone what he started in 2009, when he sacked the chief executive officers, CEOs of 10 banks over allegations of lack of corporate governance. But shareholders may have been the more shocked even this time because the action came two months ahead of the controversial deadline Sanusi gave them to recapitalise or risk a takeover. Aside from the fact that the announcement came like a thief in the night, it also came at a time the controversy over the issue of interest-free banking or Islamic banking is yet to settle. This is hardly the medication needed for an ailing economy. At the receiving end are small and large-scale investors in all the sectors of the economy.
Pity investors in the Nigerian economy. Anywhere they turn, there is the image of the horned CBN dragon waiting to strike, many a time insensitive to what the law or the court says. The situation is not helped by the fact that this leviathan of sorts, with much audacity, dares, and even rides roughshod over, the national legislature. With the airs of a charged bull in a china shop, he has trampled upon the banking terrain throwing up tremors here and upheavals there, all in a manner that has invested the entire economy with panic. Now that the man is some two years in office, his CBN has come to be known for arbitrariness, deception and the total lack of the sobriety and unflappability expected of the regulatory body in a financial sector. He operates with the shocking luxury of one who is unencumbered by responsibility or by a sense of accountability to some higher authority.
However, it is expected that where the courts fail to tame him and he could intimidate the legislature, the President whose office appointed him and to whom he reports should be able to pull him by the ears before he pulls the house down on everybody’s head. That, surely, doesn’t seem to be the case. It is either Mr Goodluck Jonathan does not know that as the President the buck stops at his table or he is too shy to caution the imperial banker or he is oblivious of the place of central banking in the health of any economy especially as this may affect the great dream of making Nigeria one of the 20 greatest economies in the world by the year 2020.
Otherwise, we expect that after the tremor created by the sacking of the bank CEOs in 2009, the drying up of the tokenism in the name of credit facilities given to entrepreneurs prior to that exercise and the negative impact the exercise had on the affected banks and businesses in the country, the Jonathan administration ought to have been alert enough to stop any further step capable of putting the economy at risk. But we fear that the President, rather than stand up to the CBN governor, prefers a reach for afghanistanism by receiving some inconsequential visitors or creating controversies that may shift attention away from issues of grave economic importance that should stare him in the face in his Aso Rock office. This should not be the case and Mr Jonathan should not encourage anything like it if the administration’s handling of our increasingly tempestuous national affairs is to be taken seriously.
The result of Emperor Sanusi’s brinksmanship, or, perhaps more correctly, of his running loose, is damage to the poor banking culture, to which only 20 per cent of the adult population in Nigeria is said to be exposed. (This is according to a survey on access to financial services in Nigeria by EFINA, funded by DFID and Bill and Melinda Gates Foundation). The few Nigerians who had embraced a banking culture have become weary of the banks that have been discredited by the infallible regulator who should know the state of health of the banks. We do not doubt the good intentions by the CBN of protecting depositors’ fund through the takeover exercise. But we are, however, worried that even the depositors’ fund that the authorities strive so much to protect is, paradoxically, at risk because of the run on the banks. In this case the CBN shares the blame. In the attempt to clear the mess created by the sacked management team of the affected banks, the apex bank threw caution to the wind, shouting on the rooftop. The consequence is the creation of a needless apprehension among the banking public and the eventual crippling of the banking sector and, thus, of the larger economy!
This is where we expect that the President should have risen to the challenge by ensuring that the giddy open-ended reforms of Sanusi are given a second, critical look with a view to ensuring that the economy comes to no major harm. Such response is the more necessary with the scourge of terrorism (Boko Haram’s) complicating economic migraines such as the power challenge and poor infrastructure. By throwing a hammer into the nation’s “financial works”, no nightmare could be more grave in our present circumstances, for the capital market and the prospects of attracting investors and their much-needed capital. Today, for instance, what is left of the capital market that Sanusi’s measures put much in ruin is again becoming further asphyxiated by the new turn of reforms. Expectedly, the investors are taking flight to safer climes. With the loss of investor confidence in the Nigerian economy, is the erosion of the hope that we, as a nation, may realise our economic potential so that we can join the league of advanced nations in just nine or so years. What makes the development so sad is that the same agency of government expected to give fillip to development efforts has become the vector for national descent. Surely, this cannot be in tandem with the expectations of Nigerians who gave a broad mandate to President Jonathan with the hope that he will champion the needed change for a fast growing economy. In other climes, the head of government talks about the state of the economy and efforts at making sustained improvement and growth possible but in Nigeria, the President has been short on economy, except when he re-echoes himself on target for energy. This makes us yield to the temptation to ask, ‘Who really is in charge of the economy in Nigeria?’ The President appears to have surrendered that space to Mr. Sanusi. We do not believe that the economic blueprint of Sanusi is what is desired to take the country to the Promised Land.
The absence of a clear-cut economic re-engineering paradigm for steering the ship of state towards the goal of the 20-2020 is a major setback in this dispensation. It is instructive that at a time the country is making so much money from oil, she is not investing in the non-oil sector. Rather, the administration is drawing down the foreign reserves, built by a regime that did not make as much money. Equally disturbing is the rising foreign debt profile, after the Olusegun Obasanjo administration had succeeded in getting debt forgiveness for the country. So why should Nigeria be borrowing money in times of plenty? Yet the same country fought a civil war without borrowing and without reliance on oil. We also find strange the economics of using the revenue that should have been spent on infrastructure to shore up the value of the national currency, which in any case, continues to inexorably depreciate against major world currencies. Such things can only happen under some economic magic conjured by a Sanusi.
Without doubt, Sanusi, among the banking elite of the land, is a great name in financial risk management but we see more risk in what he has done in the short period that he has been in the saddle at the CBN than attempts at trouble-shooting. The sad thing is that the damage done by this insidious assault on the economy may have drawn us back to the days before the bank consolidation. The rule now is that the few investors left in the economy nurse heartaches as the cowboy bravura of the CBN chief suppresses the kitten coyness of his principal. Now that an economic team is put in place with Ngozi Okonjo-Iweala, the minister of finance as coordinator and the President as chairman, we hope there will be a direction, and the President will have the political will to tell the governor where to draw the line. We hope that the governor, said to be used to being worshipped by cabinet members, will not see himself in the new team as competing with the coordinator. Yes, the CBN is independent but Mr Jonathan should ensure that Sanusi does not exploit that independence to run the economy aground. Any further politicking with the economy will only end in disaster. We have had enough troubles to contend with already.
For instance, in the banking sector, the nationalised banks are not the only casualties of the loud economic terrorism that has bestridden the Nigerian landscape in the past two years. Their immediate co-sufferers are the four banks believed to be a little better than them, but which are now in merger talks. Though the banks – Intercontinental, Oceanic, Finbank and Union – have each signed Transaction Implementation Agreements, TIAs, with interested core investors, the nationalisation of the three banks put them at a disadvantage. The sword of Damocles that dangles over them in the event that the negotiations do not fall through necessarily weakens their negotiating power. They may, therefore, end up selling for much less than the actual value. Already, as a result of the nationalisation of the three banks, the stocks of all the seven have been suspended by the Securities and Exchange Commission.
That was particularly necessary because those who have lost their investments in the capital market in recent years are afraid of yet another loss through bank shares or deposits. But that also spells doom for the investment of the stakeholders in the banks. Yet the shareholders should take responsibility for the poor state of the banks, which made them vulnerable to the big stick wielded by the CBN. They should have called their managements to order long ago. However, that is not enough reason to deny them their right as stakeholders. The arbitrary nature with which the apex bank had handled the situation is condemnable, particularly when it is realised that some of the managements the CBN put in place were equally guilty of the abuse of corporate governance for which their predecessors were sacked. Unfortunately, the official attitude has been that those who demand reasons for the failure of the CBN managements do not know that masters do not make mistakes. Those who feel the pain are the faceless shareholders out there.
Yet the shareholders and staff of the banks are not the only losers. The economy suffers even an unintended haemorrhage with the injection of huge amounts of money in the troubled banks. At the beginning, the CBN injected N620 billion in the ‘rescued’ banks, then after the management team it appointed to run the banks had declared sumptuous profits approved by the regulatory body, the same apex bank surrendered the ‘improved’ banks to bridge banks. Now the new banks will take another dose of funds provided by the Asset Management Corporation of Nigeria, AMCON, to the tune of N679 billion. Interestingly, some of the ‘new banks’ will now be run by some members of the management team sacked by Sanusi in 2009.
Now, should we not be asking questions about what was done to Sanusi’s management members who were accused of corruption? The President does not require the services of professors of economics to know that Sanusi’s economic theory does not suit the Nigerian situation. We will only be wrong if the President is in agreement with the CBN tsar that the growth of the national economy is determined by the success of the private estate. Our fear is that when the verdicts start coming from the courts, the individuals who circumvented the laws and due process do not share the cost with the state.
Curiously, the CBN governor cites the Bank and Other Financial Institutions Act, BOFIA, to defend his actions. It is left for the court to determine whether the authorities had the power to take over the banks the way they did or not. We expect that the apex bank should have been guided by the recent experience where the withdrawal of the licences of Savannah Bank and Societe Generale Bank was voided by the court, years after the actions were taken. Even if the federal agencies are confident that the other cases, not being conclusive (because they did not appeal against the judgments), would not make them fret, the immediate implication is that for as long as the cases are in court, no serious foreign investors will want to take the risk of investing in them. So if care is not taken, the same problem that the authorities were trying to avoid may befall the banks at the end of the day. The CBN should look into why it could not sell the banks in the first instance, in spite of the huge amount of money spent on campaigns, including road shows in the United Kingdom.
For Jonathan, however, now that he has put an economic team in place, we strongly advise that, before more damage is done, his close aides should pinch him hard enough so he can wake up to the task for which he was elected. Otherwise, the history of the present era will be harsh on Mr Jonathan, throwing damaging questions on its pages, like, “Where was the President when rascals took Nigeria’s (economic) paradise to the gutters?”