CBN: Superstar Pontiff or Criminal Accomplice

That the Central Bank of Nigeria (CBN) has sacked the executive management of five commercial banks [Afribank, Finbank, Intercontinental bank, Oceanic bank and Union bank] operating in the country is no longer news. As shocking as it appeared, it was not unexpected. It looked in no way like anybody was out to settle any personal issue; the reasons were clear and tenable.

Making a comment on this incident would not have been a top priority but with the crop of poor analysts that Nigeria has and its largely illiterate population, the tendencies are numerous for the news to cause undue and unreasonable public commentary. These unintelligent attentions would on the long run affect the banks, and indeed the whole industry, in a more negative way than the news itself. For instance, people are already planning to make a run [withdraw their deposits] on the affected banks.

Apart from the population been seriously illiterate about virtually everything and anything, another set of people that would have to share in the blame if this incident turns out to have a negative effect on the banks is the media. Reports of the sack in the Nigerian media are already being seriously twigged.  One such newspaper says the boards of directors of the banks have been sacked; another says the CBN has taken over five banks, when the CBN governor explicitly said the banks were not being nationalized and only the Managing director and executive directors were removed.

Back to why I think the sack was expected, the reasons were pretty clear. Some questions some persons would be asking now are: was the CBN right in sacking these executives considering the fact that some of them are the most respected in corporate Nigeria and even in Africa? Based on the reasons given, the apex bank is very right. Are these CEOs poor managers? Looking strictly at the situation of their banks, they were management failures. Did this mess start recently? Hell no. Are they solely to be blamed for their banks current position? Of course not.

The CBN only did the job that the banks’ board of directors should have done before now. I think we need to begin to ask again if the board actually acts in the best interest of shareholders as they always claim. Looking at the bad loan portfolio of some or all of the affected banks, their board of directors already had enough reasons to sack the executive management but none of them did.

The CBN is also now appearing like a superstar pontiff. Is it? It surely is not. The CBN is supposed to have representatives in all these banks. The CBN conducts routine surveillance on these banks and yet would do nothing until now when the situation needs critical rescue. In 2007, Reverend Agbetuyi, the erstwhile chairman of Spring bank who was sacked by the CBN, accused the banking surveillance department of the CBN of complicity in aiding fraud in the bank but his allegations were dismissed with a wave of the hand. It should be remembered that he said in a widely published letter to the then CBN governor, Charles Soludo, that having the right amount of money, you could get any letter out of the CBN’s banking surveillance department because of the level of corruption exhibited by the department’s staff members.

The CBN should itself start its own internal cleansing, starting with the banking surveillance department headed by CBN deputy governor, Tunde Lemo. We need to know why they have to discover all this until an asset audit was ordered by the new governor while they had probably been giving pass marks to the banks before now in their routine surveillance checks.

And then the irresponsible federal government that has refused to pay its oil subsidy dept which it owes to petroleum product importers. These dept makes up a large part of the doubtful loan portfolio of the affected banks.

Also, so that these banks and their sacked executives don’t look like the worst in Nigeria and create an imbalance in the industry if a run is made on the banks, we need to know the results of the other banks whose assets have been audited. They may just have missed been sacked by the whiskers and not really have the clean bill of health that the media is attaching to them.

What should you do as a depositor? Do not panic. What you should panic about has been averted already. At least, the likelihood of a sudden distress is at its ebb. The banks were shaky due to lack of funds; now the CBN is bailing them out by injecting fresh funds enough to reduce the imbalance they have caused and maintain their capacity to meet their obligations to their customers.

Secondly, be careful whose analysis you listen to.