Tuesday, August 18, 2009

Nigeria News Update: EFCC Questions Sacked Bank Directors; Bailout May Reach a Trillion Naira

EFCC quizzes Ebong, Nwosu, Ibru, trails others

Aug 19, 2009
Nigerian Vanguard
By Omoh Gabriel, Dayo Benson, Peter Egwuatu Innocent Anaba and Emma Ovuakporie

Akingbola gets court’s leave to challenge sack, CBN guarantees foreign loans of affected banks

LAGOS—The Economic and Financial Crimes Commission, EFCC, said yesterday that it had arrested three of the five former Managing Directors of banks sacked last week by the Central Bank of Nigeria for questioning, just as the apex bank also had guaranteed all foreign loans and correspondent banks lines of the affected banks.

Also yesterday the Federal High Court granted the former Managing Director of Intercontinental Bank Plc, Dr. Erastus Akingbola, leave to challenge for the purpose of quashing, his removal as the MD of the bank by the Governor of CBN, Mallam Lamido Sanusi. The out-going Chief Judge of the Federal High Court, Justice Abdullahi Mustapha, granted the leave, following an ex-parte application by Akingbola’s counsel, Chief Felix Fagbohungbe (SAN).

The sacked bank Managing Directors in the EFCC custody as of yesterday evening were Mr. Bartholomew Ebong, formerly of Union Bank Plc and Mr. Okey Nwosu formerly of Fin Bank MD; and one Mr. Peter Elolo of Falcon Security.

Vanguard also learnt that Mrs Cecilia Ibru, former MD of Oceanic Bank was picked yesterday by operatives of the States Security Services SSS , when she attempted to leave the country. Mrs Ibru and others arrested by the SSS were to be handed over to the EFCC later .

The commission had earlier threatened to declare the ex- bank chiefs wanted but dropped the idea after some of them were apprehended. EFCC spokesman, Femi Babafemi, told Vanguard on telephone that “we only threaten to declare them wanted , but we have gotten some of them already.”

CBN guarantees all foreign loans

Also yesterday, as a way of assuring foreign investors and correspondent banks that all is well with the Nigerian financial system, the Central Bank of Nigeria said it would guarantee all foreign loans and correspondent banking lines to the five banks bailed out on Friday in a N 400 billion rescue package.

The apex bank in a statement said the five banks which management it sacked for poor corporate governance and non performing loans would have all their foreign loans and corresponding banking lines guaranteed by it, stating that it will soon organise a road show in London to explain its action and dialogue with foreign investors.

The CBN in the statement said “Following the recent regulatory action taken by the Central Bank of Nigeria in respect of Afribank, Finbank, Intercontinental, Oceanic and Union banks, it has become necessary to make the following clarifications. The Central Bank of Nigeria’s action is aimed at strengthening the financial condition of the affected banks and ensure the protection of depositors and creditors funds”.

According to the statement “The Central Bank of Nigeria hereby guarantees all foreign loans and correspondent banking lines of the 5 banks” and “will very shortly organise a road show in London to explain its actions and dialogue with investors and correspondent banks.”

The apex bank statement further said “The Central Bank of Nigeria reiterates its commitments to ensure the stability of the banking industry and will therefore not allow any bank to fail.”.

The central bank on Friday injected N 400 billion into Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank, saying their undercapitalisation posed a risk to the entire banking system. The five institutions, which between them account for 40 per cent of banking sector credit in Nigeria, had run up bad loans worth a total of N 1.14 trillion.

The central bank has said the capital will be convertible into Tier 2 capital or preference shares and that its intention is to find investors as quickly as possible to recapitalise the five institutions.

Court grants Akingbola leave to challenge removal

The recent removal of Managing Directors of five banks in the country, took a new twist yesterday, as a Federal High Court sitting in Lagos, granted the former Managing Director of Intercontinental Bank Plc, Dr. Erastus Akingbola, leave to challenge for the purpose of quashing, his removal as the MD of the bank by the Governor of the Central Bank of Nigeria (CBN), Mallam Lamido Sanusi.

The out-going Chief Judge of the Federal High Court, Justice Abdullahi Mustapha, granted the leave, following an ex-parte application by Akingbola’s counsel, Chief Felix Fagbohungbe (SAN).

The court granted the first prayer of Akingbola, which was for “an order of this court granting leave to the applicant (Akingbola) to apply for judicial review by seeking an order of certiorari for the purposes of vacating and quashing, the order of Central Bank of Nigeria dated 14/8/2009, made by the Governor of Central Bank of Nigeria, Mallam Sanusi, on behalf of the Central Bank of Nigeria”. Further hearing in the matter has been adjourned till August 25, 2009.

Defendants in the suit are Mallam Sanusi and the CBN.

Akingbola is meanwhile, further praying the court to declare that there was no order made as at 18/6/2009 or at anytime at all by Mallam Sanusi for a “special examination” into the books and affairs of Intercontinental Bank Plc, during the management headed by the applicant as the Group Chief Executive”.

Other reliefs sought by him, include:

A declaration that the “Joint CBN/NDIC Ad_Hoc Assignment” conducted on the books and affairs of Intercontinental Bank Plc, from 18/6/2009 during the management headed by the applicant as Group Chief Executive of Intercontinental Bank Plc, is not a “special examination” as required by the Banks and Other Financial Institutions Act, Cap. B3, Laws of the Federation of Nigeria, 2004

A declaration that the purported examination or investigation ordered by the 2nd respondent, (or conducted at its instance) into the books and affairs of Intercontinental Bank Plc, based on the letter of 18/6/2009 and signed by one E. O. Owajulu, a Deputy Director, on behalf of the Director of Banking Supervision of the 2nd Respondent during the management headed by the Applicant or at any time whatsoever, did not comply with the requisite enabling statutes, due process of law and the rules of natural justice.

The sum of N50billon as exemplary damages against the Respondents, jointly and severally.

Naira depreciates slightly

Meanwhile the CBN sold $300 million at an exchange rate of 150.27 to the dollar at its two-weekly foreign exchange auction on Monday, short of the $422 million demanded, Bankers said on Tuesday.

The regulator had sold dollars at N150.06 at its previous auction on Thursday, the day before it injected 400 billion naira into five banks and removed their top management in a bid to prevent a systemic banking crisis.

The unprecedented move on the banks caused the naira to depreciate on the inter bank market, where it closed at N 158.60, amid fears of capital flight. But dealers said the naira strengthened a little after the result of the central bank auction was released on Tuesday, trading at N158.40 to the dollar. Demand for the dollar was expected to remain strong as banks seek to cover open positions, indicating that the naira could weaken further before close of market, traders said.

Stock market loses N241.5bn in two days

After two days of the suspension of trading on the five banks’ shares whose managing directors were sacked by the Central Bank of Nigeria (CBN) last Friday, stock market has lost N241.519 billion, as market capitalisation declined from N5.556,091 trillion on Friday last week to close at N5,314,572 trillion, yesterday( Tuesday ).
The All-Share Index, another stock market gauge also declined significantly by 1,053.60 points basis from N24,237.85 points to close yesterday (Tuesday) at 23,184.25 points.

The market capitalisation and All share index are major stock market performance indicators which measure the value and trends of securities price movement in the stock market respectively.

The five banks’ shares that were suspended from trading on the stock market include: Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Afribank Nigeria Plc and Fin Bank Plc.

The absence of these five banks’ shares from trading has affected investors’ return on investment, in the form of capital gains from the secondary market.

Meanwhile, Director General of the NSE, Professor Ndi Okereke Onyiuke has admitted that the suspension of trading of the five banks’ shares will affect the market capitalisation, adding that the suspension was placed on the banks’ shares to protect the interest of investors and the market generally.

She said, “ We could not allow the shares to be traded on the stock market because of the circumstances leading to the sack of the managing directors of those banks.

Nevertheless, we shall place only two weeks suspension on the shares and then watch what will happen in the banks as the new managing directors take over. We shall also watch the reaction of the market.”

CBN withdraws N110.5bln from circulation

Nigerian Vanguard
Business Aug 18, 2009

Activities at the Open Market Operation (OMO) wing of the money market showed that the Central Bank of Nigeria (CBN) withdrew N110.5 billion from circulation last week.

The News Agency of Nigeria (NAN) reports that the CBN also raked in N35.39 billion from the OMO and N75.11 billion on bills at the Primary Market Auction (PMA) respectively.The CBN, in its weekly report made available to NAN, said that investors needs were met as the apex bank sold to them what they wanted.

At the OMO segment, last week Tuesday and Wednesday, the CBN sold 30-day tenor bills worth N20 billion and 30-day tenor bills worth N6.21 billion respectively.The following day, the apex bank sold 30-day tenor bill worth N5.67 billion and 7-day tenor worth N3.51 billion respectively.

The report said that for all the four bills, bidders got all that they bidded for and that the bills would mature on Sept. 10, 11, 12 and 20, 2009 respectively.The bid rates and issue rates on the bills stood at 9.00 per cent respectively but it, however, made a deficit of N35.39 billion at the OMO segment At the PMA, long term bill continued to delight investors as all categories of bills on displayed were sold to the bidders.

At PMA window last Thursday, the CBN issued 91-day tenor bills, 182-day tenor bills and 364-day tenor bills and all were oversubscribed by investors, but the CBN only gave out N15.11 billion, N15 billion and N30 billion respectively. According to the report, the range of bids and the issue rate on the 91-day tenor bills which would mature on Nov.12, 2009 were between 3.49 and 4.70 per cent.

The 182-day tenor bill had it bid rate and issue rate hovered between 3.50 and 5.80 per cent with maturity date of Feb.11, 2009 which had a true yield of 5.54 per cent. The CBN made a repayment of N15 billion on the 182-day tenor bills, making its net withdrawal to remain at a balance of N15 billion.The 364-day tenor bills, which are to mature on Aug.12, 2009 had its bid rates between 4.99 and 7.45 per cent. The report said that the issue rates hovered between 4.99 and 5.63 per cent while the true yield stood at 5.93 per cent.

Bailout May Hit N1tr

NSE halts trading on affected banks’ shares •Anxious depositors besiege banks

By Our Reporters, 08.18.2009
Nigeria ThisDay

The Central Bank of Nigeria (CBN) is currently considering the injection of more funds into some of the five undercapitalised banks whose managing directors and executive directors were removed last Friday.

The CEOs – Barth Ebong of Union Bank, Cecilia Ibru of Oceanic Bank and Okey Nwosu of Finbank, Sebastian Adigwe of Afribank and Erastus Akingbola of Intercontinental Bank – were fired by the banking watchdog on the ground of being “principal causes of financial instability in their banks and for acting in a manner that was detrimental to the interest of their depositors and creditors”.

The CBN appointed new CEOs to head management teams that will include executive directors and chief financial officers to be appointed by the regulator, pending when the banks are resuscitated and handed over to new managements.

In a bid to address the banks’ liquidity problems, the banking watchdog had last Friday injected a total of N420 billion into the banks but THISDAY learnt last night that the package may soon hit N1 trillion to put the banks on a sound footing and restore full confidence in them.

THISDAY gathered the initial funds were not sufficient to meet the needs of some of the troubled banks whose new managing directors have already intimated the CBN Governor, Mr. Sanusi Lamido Sanusi, of the need to pump in more funds because of what they met on ground.

Last Saturday, according to sources, the new helmsmen of these banks met with Sanusi in Lagos and tabled their respective challenges and financial demands, which the latter is currently considering.

There was a case of a bank whose share of the bailout package disappeared immediately it hit the bank’s account with CBN.

The bank, according to information, was already indebted to the CBN to the tune of N60 billion and other fellow banks to the tune of N70 billion through the inter-bank market - the window where banks borrow funds from one another to meet their immediate cash needs.

Consequently, the bank’s account was thrown into a negative of N30 billion.

The new managing director of the bank was said to have told Sanusi that given this development, coupled with the anticipated panic withdrawal and the funds that would be required for operations, there would obviously be a need for more funds to be injected into the bank.

Meanwhile, the Nigerian Stock Exchange (NSE) yesterday placed a full suspension on the shares of the five banks.

With the full suspension, there will neither be movements nor trading in the shares of the affected banks. It is, however, not a punitive measure but a tool employed by an exchange to prevent share price manipulation or outright dumping.

Also, the NSE has said that its second vice-president and former Intercontinental Bank chief, Dr. Erastus Akingbola, remains a member of its board until there is a security report indicting him of any crime.

Director-General of the NSE, Prof. Ndi Okereke-Onyiuke, who made this known in a chat with newsmen in Lagos, said the decision to fully suspend the shares of the banks indefinitely was borne out of a joint agreement by the CBN, the Securities and Exchange Commission (SEC) and the NSE to forestall investors or even the sacked bank chiefs from dumping their holdings in the banks.

Okereke-Onyiuke, however, said that the decision to suspend trading in the banks’ shares would be reviewed after two weeks.

On Akingbola, the DG NSE said that he was elected to the board of the exchange on a personal capacity as the chairman of Lagos/Ibadan zonal branch of the exchange and not in the capacity as the managing director of any institution.

She also said that until there is an established criminal report against him, he will be accorded the full privilege of a member of the council of the stock market.

Okereke-Onyiuke, while debunking claims that the CBN action was inimical to growth of the economy, said in a way the injected N400 billion into the banks would, beside having a positive impact on the capital market, “is also in the best interest of investors in those banks as it will check the collapse of the banks”.

Explaining the injected funds to the banks, the NSE DG said the money was meant for tier-two capital of the banks, to assist them in their operations and not for shareholders of the banks to share as dividends.

“It is not for shareholders to distribute. It is to shore up the porous nature of the banks, so that when a cheque is written by a customer it will be honoured,” she said.

According to SEC, which gave the directive to place the suspension on the shares, the new managements of the banks are expected to give the market a situation report at the expiry of the two weeks.

SEC’s Head of Media, Mr. Lanre Oloyi, said in a statement yesterday that the action of the CBN would strengthen the affected banks, the financial sector and invariably benefit shareholders of the banks.

Across the country, there were mixed reactions from depositors to the scenario in the banking sector. THISDAY reporters who monitored the developments mainly in the branches of the five banks that were affected, spread all over the country reported that the situation affected the banks, their branches and locations differently.

While some of the banking halls appeared deserted because of the use of the Automated Teller Machines (ATMs), in others there were long queues.

Normal Mondays usually witness long queues in the banking halls because of weekend expenses, but there were signs to suggest that yesterday’s queues were not normal.

Nigeria nearing a failed state -Akeredolu

Tuesday, 18 August 2009 19:07

The president of Nigerian Bar Association (NBA) has said the country is "gliding toward being a failed state". Oluwarotimi Akeredolu said democratic institutions had failed to adequately represent Nigerians and uphold the rule of law.

The Nigerian Bar Association chief also expressed doubts over the government's commitment to tackling corruption.

When President Umaru Yar'Adua was elected in 2007, he pledged zero tolerance for corruption.

"The NBA has serious doubts concerning the commitment of government in combating the menace of corruption. There are outstanding issues of corrupt practices in government circles," Nigeria's This Day newspaper quoted Mr Akeredolu as saying.

As an example, he said, Nigerians were still waiting to hear the outcome of an investigation into the Halliburton scandal.

The US construction firm has admitted paying bribes to top officials between 1994 and 2004.
Anti-corruption agencies have rejected criticism about their shortcomings, saying they have recovered hundreds of millions of dollars and made dozens of prosecutions in the past year.

Mr Akeredolu, who was speaking at the Nigerian Bar Association annual conference, also questioned the police's practice of parading suspects in front of the media before their trials.

The police have come under fire recently after the leader of an Islamist sect died following his arrest earlier this month.

Police said he was killed in a shoot-out when he tried to escape but human rights groups said it was a summary execution.

Correspondents say democracy activists have also been disheartened by the lack of electoral reforms ahead of elections in 2011.

Observers say the last elections were characterised by vote rigging, voter intimidation and ballot-box stuffing.

NBA seeks role in appointment of judicial officers, SANs

Govt opts for legal solution over Lagos councils
Fashola, others list hurdles to devt

By Bertram Nwannekanma
Nigerian Guardian

LAWYERS, politicians and some other prominent persons again dissected the problems of Nigerian nationhood, with a clarion call for urgent steps to lift the country to the club of elite states in terms of holistic development and growth.

The occasion was the yearly general conference of the Nigerian Bar Association (NBA) at which two state governors, Babatunde Raji Fashola (Lagos) and Adams Oshiomhole (Edo) made profound statements on the country's underdevelopment and the way forward.

While Fashola called for genuine adherence to the rule of law and patriotic governance to bring Nigeria from the brink, Oshiomhole disclosed that the governors were skeptical of the federal government's approach to electoral reforms.

And the disturbing phenomenon whereby unscrupulous persons are allowed to sit on the Bench was deplored by the NBA's leadership which resolved to henceforth make inputs in the appointment of judicial officers as well as the Senior Advocates of Nigeria (SANs).

Meanwhile, an assurance came from the Federal Government that the impasse over Lagos State's new councils would be resolved constitutionally.

NBA's President Oluwarotimi Akeredolu (SAN), said at the opening ceremony of the conference held at Eko Hotel & Suites, in Lagos that the ugly incident in the Bench has reignited the call for a review of the appointment process for judicial officers

According to him, the appointment of SANs has been causing ripples in the Bar as not a few lawyers believe that the process had been tainted by the meddlesomeness of some people.

The discontent, he said, has threatened, very seriously, to erode the respect accorded to the beneficiaries of the title that some lawyers have even gone ahead to form a pressure group for its abolition.

He affirmed that the Bar believed that it should have a direct input in the appointment of its members.

His words: "We believe we are better placed to assess the suitability or otherwise of potential candidates for the position apart from the objective criteria set for eligibility.

"A situation which ensures that a junior in chamber is appointed when he has no separate office of his own requires close scrutiny."

He said the NBA would continue to insist on the inclusion of its accredited representatives in the Privileges Committee.

He went on: "Unless a more transparent approach is adopted in the whole process, we may be unable to stem the tide of protest brewing among lawyers.

"If we fail to convince the generality of our colleagues of our sincerity, they are also at liberty to withdraw their respect and support for whatever design from which they feel alienated.

"Dedicated practitioners must be rewarded for their industry."

On the appointment of judges, Akeredolu said many lawyers believe that some people whose understanding of the law was gravely doubtful have found their way into the judiciary to "our discomfiture."

He said allegations of nepotism, godfatherism and outright tribalism in the appointment of judges were so rife that the Bar would no longer ignore the complaints of genuinely concerned lawyers and Nigerians generally on the issue.

He advocated that the appointment of judges must not be reduced to a mere routine associated with elevation of civil servants in service.

"Only those, who possess sufficient gravitas and sobriety should be considered eligible," he stressed.

He added that the NBA's activities would no longer be restricted to talking to those in power as there were now programmes designed to tackle the problems facing young practitioners.

On his part, the Attorney General of the Federation and Minister of Justice, Chief Michael Aondoakaa (SAN) said the government would follow a legal path over the new Lagos councils.

He also pledged the Yar'Aua administration's commitment to pursue programmes and policies that would enhance the observance of due process in governance, the dignity of Nigerians and ensure respect for human rights at all levels of government.

Aondooakaa, who also represented Vice President Goodluck Jonathan, said that to this effect, the Federal Government had written to the Human Rights Council in Geneva on the reported killing of the leader of Boko Haram.

He assured that those found culpable at the end of the investigations would face the full weight of the law.

While praising the developmental efforts of the Lagos state government, the minister canvassed continued co-operation with the NBA to realize its objectives.

This, he said, was necessary because of the enormous positive influence lawyers wield in the mobilization of public opinion as well as their unique positions to advance the genuine common cause.

The minister expressed satisfaction with the conference's theme of "Under Developed Nations: Failed Economies and the Future of the Legal Profession," saying it was a challenge to members of the calling to contribute positively to the success of current efforts by government to address the country's developmental challenges.

According to him, "since the future for the legal profession is closely linked to the state of development of the country and the soundness of the economy, as well as to guarantee a sound future for the legal profession, there was need to do all that was necessary to grow the economy and enhance the development of all."

He tasked the NBA to evaluate the critical linkages and synergies between economic development and the practice of law.

In his keynote address, Fashola called for the strengthening and encouragement of Courts to perform their constitutional rights.

He cautioned on the resort to self-help by government agencies and individuals and admonished that interpretation of judgment should be left for trained lawyers and not just any legal practitioner.

He also called for the internationalization of legal practice and urged the Bar to accept the challenge posed by Information and Communication Technology (ICT).

Fashola also lamented the non admissibility of technology based evidence in court.

While describing the choice of the theme as apt with the current situation in the banking sector, he lamented that the lack of optimal utilization of the country resources has led the nation to be classified as underdeveloped, with a wide disparity between the rich and poor which he said was a major landmark of underdevelopment.

For Nigeria to get out of its current crisis, he said there was need for strategic leaders and positive thinkers. The future, he said, was now as there was no luxury of time waiting for generations to come.

For the Speaker of House of Representatives, Rt.Hon. Dimeji Bankole, members of the Bar should enrich the process of law making through contributions.

He urged the Bar to participate more in governance by sending bills to the House especially in the recent attempts to review the Constitution and the Electoral Act.

The Minister for Foreign Affairs, Chief Ojo Maduekwe, charged lawyers to support their members in politics and demonstrate total resentment to corruption in or out of government.

He urged lawyers to do something to their fees, saying some of them are outrageous and can contribute to corrupt tendencies.

The governor of Kano State, Alhaji Ibrahim Shekarau, also attended the event, among others.

Bank Distress in History

By Weneso Orogun, 08.18.2009
News Analysis
Nigeria ThisDay

A Nigerian economist attempting to highlight the history of distress in banking may do well to begin by acknowledging his debt of gratitude to former United Nations Under-Secretary / Executive Secretary of Economic Commission for Africa, Professor Adebayo Adedeji, who expertly treated the subject 13 years ago at a forum organized by the Nigerian Society of International Law. Incidentally, but not surprisingly, many of the prescriptions by the master are still relevant today.

The South Sea Bubble of 1720 is the best known episode of distress in banking. The South Sea Company, formed in England in 1711 to trade with Spanish America, was allowed in 1720 to assume responsibility for Britain’s national debt in return for a guaranteed profit. This complicated arrangement ignited a speculative boom with unscrupulous financiers taking advantage of the public excitement about assured profits to form other companies with dubious intentions.

Many of the newly formed companies, some of which sought to extract gold from sea water, soon failed. Like the others, the South Sea Company also failed leaving thousands of shareholders to lick their wounds. This precipitated a financial catastrophe in London with matching disasters in Paris and Amsterdam. Subsequent investigations revealed corruption among ministers, some of whom resigned and one committed suicide. Prime Minister Robert Walpole saved the situation by transferring the South Sea stock to the Bank of England and the East India Company. He also ensured the passage of a law severely restricting formation of joint stock companies. Although the South Sea Company was not a bank, the causes of the bubble and its implications have been repeated time and again in the world’s financial and capital markets.

The collapse of Bank of Credit and Commerce International (BCCI) was tragic. The Financial Times of London described it as the most dramatic business story in years. It credited BCCI with the biggest fraud in banking history. Whole chunks of balance sheets were rotten. Many loans were fictitious and non-performing while bank managers plundered deposits to conceal huge losses.

According to Adedeji, the first bank failure in Nigeria occurred in 1930. Between that year and 1959 when Central Bank of Nigeria (CBN) came into existence, 21 banks failed. In 1954 alone, 16 banks failed in Nigeria. The Muslim Bank, the Lagos Bank and the Berini Bank failed in the 1960s. Nigeria was spared more bank failures until 1989 when failures became more frequent.

Causes of bank failures

Since the example of the South Sea Bubble of 1720, bank failures have always been associated with endogenous forces: lack of scruple, lack of knowledge and information, poor judgement, speculation, greed and barefaced fraud. In Nigeria the bank failures of the Abacha era were attributed to inadequate capital base, fraudulent, self-serving and corrupt practices of the owners and managers, meddlesome interference of board members in the day to day running of the institutions and regulatory laxity. Other factors in bank distress are those over which individual banks have no control. These include the domestic policy context and global financial developments.

The recent removal of chief executives and executive directors of five banks by CBN has been attributed to the need to save the banks from collapse because their balance sheets had shrunk with subsequent cash flow problems. The CBN governor said the banks needed fresh funds because of their huge exposure to the capital market and huge non-performing loans that contributed to the liquidity problems in the affected banks. The issue of margin loans played a big part as bank mangers under-estimated market risk-the risk thathe value of the shares used as collateral for the margin lending could crash. To what extent was greed responsible for the under-estimation of market risk?

As events unfold, more information is expected to emerge on the role that regulatory laxity, greed and avarice played in bringing the careers of the five bank chiefs to a dramatic end.

For example, as Dr. Ayo Teriba, CEO of Economics Associates, recently told THISDAY, Nigeria’s deposit money banks (DPMBs) in the post-consolidation era have become financial supermarkets that still talk to regulators who only see a small fraction of what is going on in the enlarged organisations. “It did not matter much when the stock market was bullish, oil prices were high and rising, external reserves were building up and inflation rate was single digit but it mattered a lot on the downside,” Teriba explained.

“If we had consolidated the regulatory process, more information would have been shared among regulators to the benefit of the entire economy,” Teriba emphasised. CBN governor Sanusi Lamido Sanusi confirmed this in his recent interview with the Board of Editors of THISDAY. He acknowledged the need for more information sharing among financial services industry regulators than is happening right now.

Another point worth noting is that towards the end of the Soludo era at the apex bank, the regulator got too close to some banks for comfort. “The damage that did to credibility was enormous because at a point it became difficult to ascertain what was happening between the banks and the CBN,” Teriba observed adding that at a stage one was not sure of what was being covered up.

Way Forward

The echoes of distress that now pervade our landscape are the consequences of allowing a distorted macroeconomic environment which encourages trading in money as opposed to lending for production in agriculture and manufacturing to emerge. "In other words, our banking system must be totally committed to the creation of a favourable socio-economic environment for real productive investment and not for speculation", to quote Professor Adedeji.


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