BANKING REFORMS - AN ENDLESS EXERCISE?
IN spite of reforms and injection of public funds into ailing banks, the banking sub-sector of Nigeria’s financial system has continued to constitute a source of worry to both depositors and investors. The governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, was recently reported as saying that the number of banks in the country was likely to drop to 20 because the four remaining banks supposedly bailed out might not be able to make the recapitalisation target at the end of this round of reforms. What this means is that the public funds injected into them have gone down the drain.
THE 1990s witnessed bank failures at an alarming rate. This prompted the recapitalisation cum consolidation programme introduced by the CBN under Professor Charles Soludo’s watch. The exercise was celebrated as a feat and the final solution to the many problems of Nigeria’s banking industry. It did not, however, take too long before it became manifest that the consolidation process had its own defects and was not without abuses. In the course of the acrimony which broke out later, the CBN was accused of approving the conversion of depositors’ funds to shore up the shareholders’ capital of one of the six banks that came together to form the Springbank. The CBN was also said to have refunded the “Mandatory Liquidity Deposit (normally held statutorily for all banks by the Apex bank) to help the favoured bank to refloat its liquidity.” These acts of favouritism and compromise of standards gave an unfair advantage to the favoured bank in the determination of the ownership structure of the Springbank. What was not clear while the altercations and revelations were going on was whether the Springbank’s case was an aberration or a tip of the iceberg.
THE startling discovery which Sanusi announced on his assumption of office as CBN governor showed that the state of affairs in the banking industry was not what it was hyped to be. He discovered that some banks were permanently hooked up to the CBN for sustenance.
Immediately he severed this link, they started tottering on the brink of colapse. He had to inject public funds into them to stave off another round of bank failures. He sacked the top management of the affected banks and replaced them with his own appointees. The media has since been awash with criticisms, allegations and counter allegations. Sanusi is also being accused of pursuing a predetermined agenda.
THE affected banks’ chief executives have been accusing Sanusi of pursuing a hidden agenda and unjustifiably taking over their businesses. They have, however, not explained why their banks were clinging to the CBN the way a leech attaches itself to other creatures.
ON his own part, Sanusi should see the likely disappearance of four ailing banks from Nigeria’s financial landscape as a failure of his own efforts to put the affected banks on the path to recovery and ensure unshaken confidence in the banking industry. There have been allegations that those he appointed to replace the top management staff of the affected banks have been enjoying the same outrageous remunerations as their sacked predecessors. It was reported that sacked managing director of Bank PHB, Mr Francis Atuche, was entitled to collect $450,000 (N70 million) as offshore leave allowance in four years. The receipt of a huge sum as annual leave allowance by the new CEO of Intercontinental Bank Plc, Lai Alabi three months into office also readily comes to mind.
THIS gives rise to certain vital questions. What is the annual remuneration package of these bank heads? What is the annual remuneration of their directors and management staff? What is the average annual profit of these banks where CEOs receive such unbelivable sums as salaries and allowances?
THIS means that the injected funds have been going into individual pockets as salaries and allowances. It has for long become apparent that the crises in the financial system have resulted largely from various forms of abuses which the regulatory agencies have failed to contain. The CBN inspectors’ physical presence in the banks has not stopped the declaration of paper profits. The apex bank looks on while outrageous remunerations deplete the resources of banks. This is why banking reform is becoming an endless exercise. It is unlikely that any banking reform will produce the desired result unless the regulator itself is reformed.
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