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Where will Nigerian bank crisis lead?

August 20, 2009

The list published by Nigeria’s central bank of those who owe money to the banks it has just bailed out makes clear that the situation has already gone well beyond just being a banking crisis.

The list cuts across the business elite and Nigeria’s regions and also includes many politically powerful figures. (And it doesn’t even appear that all those who could have been named as directors of the debtor companies have been identified).

It raises a question as to whether so many of the great and good are simply unable to pay their debts and if so what that means for business in Nigeria as a whole? If they could pay up, then why haven’t they?

It also raises a question as to how those ‘named and shamed’ will react, particularly those with major political sway, in a country where behind the scenes manipulation is a way of life.

The Economic and Financial Crimes Commission has set a deadline for the debtors to start coming up with money or face arrest, but its efforts to prosecute former state governors in the past were sometimes stymied and its former boss Nuhu Ribadu driven from office.

What will be the fate of Central Bank Governor Lamido Sanusi (left), only recently picked for the post by President Umaru Yar’Adua?

How well do you think the crisis is being handled? Please take your chance to vote below. We welcome your comments too.

Pictures: Akintunde Akinleye (Reuters); Central Bank of Nigeria

 

 

Comments

Am Okenda , studying in Malaysia as Business Information system student. I think Nigeria banks are not working well in the sense that how can you loan money to a criminal that called his name a rich man …lol without paying back this money, and you call yourself a bank…In addition to this, the so call banks forget that this money belongs to a common people trying to save #1 income they have achieved.. So EFCC and CBN arrest them and jail them till 20yrs….

 

Hello

The decay in the banking sector of Nigeia had long been in the banking system decades ago. Therefore, realising that fact today is rather too late and also calls for emergency redress of the situation by taking first of all a few fundamental steps, namely: (a) inject fund as done in Europe and America to keep the banks afloat for safety of depositors’ funds; (b) inject fund on behalf of every existing banks today into the Nigerian Deposit Insurance Corporation (NDIC)as measures of insurance for the protection of the lives of all the banks in the country plus inputs from each of the banks towards a stronger insurance for the banks; (c) the banks executive should be treated under indictement process which involves suspension of the indicted MDs/CEOs of the banks, while their deputy oversees affairs of the banks during the course of recovery of looted funds so that they – the suspended ones could be called upon from time to time give clues as to the whereabouts and ways for recovery of the funds at the end of which they could be prosecuted if found guilty; (e) merging of banks found to be financially weak to get a stronger bank (s); (f) converting the sacking of the five MDs to suspension in the meantime pending the outcome of indepth/thorough investigations (g) plus legal prosecution of those found guilty, based on the outcome of courts’ judgement before issuing the sack orders eventually, please.

Wishing the new CBN Governor a success of it.

Golden S. Stars.
USA.

Posted by G. S. Stars | Report as abusive
 

The overall objective is good and CBN should be applauded for the bold steps. However, sensitive issues of relieving executive management of their positions should have involved the major shareholders. Well, CBN said this segment of stakeholders is not a priority in its recue moves. The question that comes to mind is ‘who is the CBN appointed managements accountable to? Depositors or CBN? What is their emolument while in the bank? The CBN action seems predetermined going by the initial comments of the new CBN governor on assumption of office – only 15 banks to operate, ready to sack banks MDs, lifting of restriction on acquisition of existing banks by foreign investors/portfolio managers etc. This creates fear that the convertible bail out money is meant to ultimately handover the banks to external persons who may come under the cloak of foreigner. Remember a section of the country had persistently complain of the consolidation exercise as destroying their banking institution. This may be long term ploy to wrest some of the banks back to them. The CBN should have waited for the entire audit of banks to be completed before this actions, now others would certainly escape tough sanctions for obvious reasons. However, it signals good banking practice if openness is embraced, the method is made an ongoing with finetunning and eliminate unrealistic target for bank staff. Thanks

Posted by Monday Mogbolu | Report as abusive
 

If the names of those debtors are investigated accordingly and prosecuted and made to pay back all the money, and the bank directors of the concerned banks are also prosecuted for granting such huge sums of unsecured loans. Then the matter would have been handled perfectly. There should be a form of deterrent to prevent future occurence. As a victim of Savannah Bank Plc. I know how painful it is when your life savings are made to disappear overnight due to microspic few greedy Nigerians.

Posted by R. Akpofure | Report as abusive
 

In this country, we so much like playing to the gallery and in the end, it puts the entire country in very bad light. Nigerian citizens, especially the very honest ones are constantly harrassed and humiliated in foreign lands. Once someone is appointed into a position where he has some authority over others, he will go to the rooftop and start yelling. Sanusi is a chip of the same filthy bloc. He has been part of the system that he claims to be cleansing now. Did he ever say anything when he was the First Bank MD? I hope the searchlight goes to First Bank, too. If his former colleagues messed up, he should have adopted a more mature and non-vindictive approach, by meeting with the Boards of those Banks, work out a solution where the system would correct itself, use constitutional means to reach out and recover the loans, etc. The whole thing smacks of some kind of vendeta and reminds me of a young man called Ribadu, who was so fanatical about his job and ended up being hounded out of office and dismissed from service. In Nigeria, as your fight others, you have to watch your back, as the socio political situation is very combustible. Good job from Sanusi, Good intention, but wrong delivery. I just hope he has not shot himself on the foot.

 

The will to expose the bad guys is welcomed but it may require a lot of advocacy to avoid lack of confidence and a run on the banks.

 

IT IS ABOUT TIME THIS PEOPLE GO TO JAIL,A LOT OF PEOPLE CAN NOT AFFORD ONE MEAL A DAY AND THIS SO CALL RICH MEN STEAL FROM THE POOR .WE CAN NOT GET GOOD JOBS IN THE WESTERN WORLD BECAUSE THIS PEOPLE,WHEN ARE WE GOING TO CHANGE FROM ALL THIS .SACKING DIRECTORS IS NOT THIS SOLUTION ,THE LAST GOVERNOR DID THE SAME THING IT DID NOT LAST IN OFFICE.OBASANJO FAMILY TOOK THIER OWN SHARE THEY WENT OFF WITHOUT ANY EXPLANATION .JAIL THIS PEOPLE NOW FOR GODS SAKE 50YRS IS GOOD ENOUGH FOR THEM.I HOPE THE CENTRAL BANK GOVERNOR TIME WILL NOT BE LIKE RIBADUS TIME

Posted by WILLIAMS EDWARD | Report as abusive
 

it is indeed a good-bad scenario in view of the covert political implication. for instance, i have the candid view that many of the “distinguished senators” can not be exonerated hence the omission of the owners/board memebers of some of the indebted institutions. more so, the country need an emergency overall in its modus operandi given the stinking political system that gives electoral victory to those afiliated to the ruling political class. for now, I’ll rather reserve my judgement given the antecedent of burying similar high-profile issues of national importance and the judicial connivance in terms of delay and preferential/unsatisfactory pronouncement. as a matter of fact, i have the firm belief that the matter will soon become a forgone issue. economic cleansing is a stillborn in the country, so is political reform. nothing will come out of the saga! May God bless the patriotic citizens of this country!

Posted by abdulfatai anofi | Report as abusive
 

Nigeria Banking Crisis. On the side of the Central Bank Governor, I believe Gov. Lamido is doing just fine, but my fear is the EFCC and the legal/judicial system in Nigeria. Can they take the bull by the horn. Lamido need all support he can get right now. I remember the former anti corruption Czar, Mallam Nuhu Ribadu when he said corruption will always fight back. Lamido should not expect the corrupt to role out drums for him.This is a real test for the President Umaru Yar’ Adua’s committment to rule of law. The rich cannot continue to take advantage of the poor forever by taking their depositors from the bank. We know the banks acted irresponsilbly but the rich should also not take advantage of the greedy CEOs.

Posted by amos amodo | Report as abusive
 

The banking business model for Nigeria has always been a suspect. For those who were around when the British Government granted the Nigerians their independence on the 1st of October 1960, the control of the Central Bank of Nigeria was effectively in the hands of the British Government; and not until the Minister of Finance, in the person of Okotiebo, decided to alter the currency from the British Pound to the Nigeria Naira did we acheive any level of control over our banking system. The successive governments since then have never taken any serious steps to reform the banking instituition since the bank itself was viewed as a controlling apparatus for the elites. How do you explain the fact that the biggest culprit in this scandal happens to be the newly elected or rather “appointed” Chairman of the Nigeria Stock Exchange! Mr. Sanusi has guts in facing down these powerful people by publishing the list; I only hope that others, with good intentions and in positions of power, will step forward and help our President fight the systemic corruption that has eaten our society to the core! And may God bless Nigeria.

Posted by J. Awowale | Report as abusive
 

I think that the whole event is being handled as if it is a plot against some bank executives without considering the ripple effects on economy in general.
There are better ways of handling issues and you still achieve good results without eroding investors confidence which untimatly ends up making little investors like us poorer for what we do not have a hand in.imagine shares that was sold at N40 being valued at N2 presently . WHAT A NIGHTMARE FOR INVESTORS.

Posted by E.Ugwu | Report as abusive
 

Good work by the new central bank Governor. My only issue is why it took a change of guard to notice all the discrepancies in the banking sector. Lets hope he dosen’t get forced out and the case swept under by people who don’t want progress in Nigeria!

Posted by Babatunde | Report as abusive
 

Good work by the CBN indeed. My problem is that some of these people [a few though] are rle models, and its really embarassing. some of these debts have not been verified, and this could results in scandals and law suits. CBN should please verify these debts before publishing names.

Posted by festus oziwo | Report as abusive
 

I used to cite the Nigerian banking sector as the only ray of hope in the doomed darkness Nigeria has crystallized to. Time has proven me wrong again

Posted by C_JAY | Report as abusive
 

I am personally happy that all this evil financial activities is been uncovered.imagine people taking loans with the populace suffering for it.

These big names make the Nigerian version of the forbes living a make believe life yet they are the worst debtors ever.

It is actually not a crime to borrow from the CBN i guess but the mismanagement of this funds is what is annoying.

I also would advice the EFCC to be very logical in their dealings with the whole situation. Because the detention of people beyond 24hrs is very odd and barbaric as it further dampens the fragile image of our country. As much as possible with justice being the sole aim we should avoid washing our own dirty linen in public.

Posted by moses soje | Report as abusive
 

Lamido Sanusi is only continuing what his predecessors – Charles Soludo and Joseph Sanusi started with the banks. Some Nigerian banks were (and apparently still are) a cesspool of murky illegalities. If he is able to succeed (and I pray he does), we will all be the better for it.

His aim is to “ensure that public confidence in the Nigerian banking system is maintained through appropriate disclosures and the reinvigoration of its policy of zero tolerance on all professional and unethical conducts”. (The quotation is from Lamido’s speech on Friday 14/08/09)

Sound Corporate governance must not be sacrificed on any altar. He now needs to go one step further and get rid of the remnants of the old guard on the boards of these banks. The non-executive directors are as culpable as their executive colleagues.

http://www.foreignpolicyexchange.blogspo t.com

 

Before you can understand what is going on in Nigerian Central Bank now you need to 1st look at the background of the NEW CBN governor.
The new gov is coming from 1ST BANK a straight jacket bank that is this is the way we have been doing it and it never fails and that is the way it must be done QED that is no room for any innovation.
2-The NEW GENERATION BANKS gave the ELEPHANTS and The STALLIONS a run for their MONEY.They made them see that there are order ways of doing things order than the way they have been doing it. Example-IF you have two Million naira and you want to buy a hullage truck of say five million 1ST bank will not give you the loan except you produce a landed property to suport it. THIS the MIND set of the new CENTRAL BANK GOVERNOR we know have.
That is every thing must be done according to GO(general order-ZOMBE according to BABA ANIKULAPO KUTI.
3-LETS go to the main issue.
The world exeperenced WORLD ECONOMIC TUSAMI which also affected NIGERIA, no banker will now that stock will kraash 50per in one week exept he is a wizzard.
a costomer bring 30% and ask his banker to back it to invest in stock of a blue chip company an things GO BAD,That to our CBN gov is an uncollaterised loan(RISK MANAGER)
4-WALKING THIS WORLD-if you are afraid to make mistake you are going no where,For those of us who deal with them we knew that a lot of ajustment have taken place if the CBN gov had handle it properly without any botled up anger (carry over anger)things could have been better.
5-Loan from BANKS is almost zero now and you can predict what that mean to the economy.THANKS

Posted by BABAFEMI FAGBUYI | Report as abusive
 

cont;FURTHER to my last comment.You will notice that two major sectors where affected by this problem that is OIL&GAS
and Stock buyers.
1-OIL AND GAS -You have 500 million of your own and you approch your BANK to finance your purchase of AGO (dissel) and price crashed from 135 naira to 70 naira in a week.
This have never happened in my 25year in this business.
YOU are sadduled with 10 million liters at shortage of 65 naira per liter That translate to 650 million naira.
Then your 500 million is wiped off and you are left with 150 million with intrest to pay on the 1 plus billion advance that the bank gave you (sofly sofly SANUSI dem not de KILL debtor na prison be the last bus stop)
THAT IS AN EMPLOYER OF LABOUR RUINED EXEPT IF GOD HELP COME,THANKS

Posted by BABAFEMI FAGBUYI | Report as abusive
 

The action of the CBN is commendable.Like many segments of the Nigerian Society you have to have connections and bribe officials before you can secure a loan from a bank here.Nearly all banks in the country are guilty of this not only the 5 that have been sanctioned.The CBN would have finished its work investigating all the banks before coming out with an unfinished reform banking agenda.Some of the debtors already dispute what they owe the banks and claim they still have standing and performing contractual agreements those banks and it is only after the sacking of the CEOs that the CBN began to look for evidence to incriminate them, a case of putting the cart before the horse.Then comes the EFCC arresting and detaining bank officials and debtors.The EFCC even went as far as detaining 9 non executive members of one of the banks who are shareholders and are not concerned with the day to day running of the bank.
There’s something I have figured out over a while since the administration of the Yaradua administration.The government have turned it eyes away and continues to promote corruption in public office and instead scuttle and sometime unjustly prosecute the private sector in a bid for their cronies to take over such business.Sanusi said we have peace in the Niger delta and our country is growing.I wonder which country he is talking about.Certainly not the one I live in.

Posted by JOLEDO | Report as abusive
 

The present civil war in the banking sector is the handy work of a particular sect “northerners” in Nigeria. It has been an orchestration set up by this sect as revenge since they lost out tremendously in the last banking consolidation of Soludo. Sanusi is only crying foul about the norms in banking in Nigeria and the corruption of the government by not paying contractors in due time to offset the loans taking from these banks. Also bulk of the debts could also be traced to certain individuals used as clones by the ruling party to obtain loans used by the ruling party PDP in rigging elections.
We all know it is the culture of this tribe to worship humans so long as they are seen as GOD “suppliers of basic ammenities” in their lives. This has been the foundation of the corruption in the banking sector where loans were either given to people perceived as high net worth individuals who claim to be carrying out the 7 point agenda of the President Yaradua led administration and his eroded vision 20 20 20 agenda. Indeed what a visionless agenda experts say Nigeria will soon part ways. All parasitic relationship shall soon be parted out with. It is only pathetic that this so called Imam got these CEOs and MDs were they wanted them.

Posted by Oluwaseun Olaposi | Report as abusive
 

Thanks to the EFCC for its bold step. I encourage president Umaru Yar’ Adua and other commited nigerian to give maximum supports the EFCC may require in order to prosecute the MDs/Debtors or whatever they call themselves. In addition, the EFCC in its efforts to crack down on financial crimes should revisit the accounts of all the government departments and bring those found guilty of frauds, embezzlements or misappropriaton of public funds to justice including the past governors, ministers etc.
I do believe that nigerian Banks are not prudent enough in their lending policies but most of these problems were or being caused by illegal arrangement between the bank MDs/officials and the debtors to defraud banks.
Bank lending criteria/policies should be more robust to prevent future crises. The current crisis within banking industry in Nigeria is not akin to international economic crises. It is self designed and made by the people in positions of authority

It is time for a change. Time to emulate the west not in principles but in spirit.

Diran Bright Ayodeji, BA(Hons) Accounting and Business Information Systems, ACCA(Part Qualified),CeMAP (UK)

Posted by Diran Bright Ayodeji | Report as abusive
 

The truth here is there is no bank reform.It is common knowledge in Africa that when a new regime comes in, it spends more time and energy to discredit its predecessor.When Obasanjo established EFCC we all thought it was a right thing. How many people were actually prosecuted?The truth here is that it is Sanusi’s window dressing to gain public acceptance. Toxic loans and bail outs were done in the UK and US, how many started by firing the MD’s. It is simply a ploy by the North to pull down the south. The next thing you will hear from them now will be Islamic Banking. Let them continue pulling Nigeria down.Why have they not prosecuted Abubakar, Abacha, Babangida that stole more than these amounts that they claim have been recovered. Same to those who think the new CBN governor has the interest of the country at heart.

Posted by Chukwuka | Report as abusive
 

What will the arrest of those owing so much to this Country do? What is required of them is to pay back their huge debts or begin to pay.On the other hand surely they have asserts at home and abroad, these could be turned into money and pay back to the Central Bank if in earnest the Central Bank Body is ready to do their honest duty to this broken Country. We wait to see what the Central Bank Body can do for us Nigerians aboad and at home.
thanks
Dorothy Ugbe

Posted by Dorothy Ugbe | Report as abusive
 

the house of representative should stay away from the on going cbn debt recovery and face their primary assignment.

Posted by friday ejeh | Report as abusive
 

I don’t think the fate of central bank governor is really important. Moreover his (the central bank governor) role is to control inflation not enforce debt collection. I think they are in serious trouble and most banks will not get their money from debtors especially if they have political ties. The government should strictly regulate debt levels to avoid putting itself in this stituation in the first place

 

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