Sunday, May 2, 2021 8:01 am
By Simbo Olorunfemi
One of the intriguing things, for me, about the Cosmas Maduka-Ifeanyi Ubah-Access Bank 21 Billion Naira story was the ease with which money made its way out of the system, in defiance of conventional credit guidelines and corporate governance protocols put in place for Banking transactions, especially Director-related. As well-meaning as Dr Maduka was, he was in breach of the rules and he would have still been, even if things had gone well. Unfortunately it didn’t, leaving a hole of N21 Billion in the Bank’s books. That about that time, the CBN sanctioned the bank and two of its Directors might not have been unrelated to this, even if it was only a slap on the wrist.
What it confirms, as we have again found out with First Bank, is that in spite of the regulations, rules, codes and the law, the banks continue to function more like back pockets for Bank Directors, big-boy shareholders, their friends and family. They freely dip their hands into the back pockets, as they like, to fund whatever venture catches their fancy. When they are done, they simply tear the back pockets and move on elsewhere, at great cost to other shareholders, staff and many times, Nigerians, who now bear the cost of whatever ‘forbearance’ or ‘bailout’ package put together by the CBN/AMCON to rescue a private enterprise run aground by big boys who simply move on to other things, private jets in tow.
As I have submitted a few times before, banking is borderline criminality. I once wrote – “A lot of what our financial institutions get away with in the name of banking in Nigeria is bare-faced criminality. That, in itself, is not news. Banking and Crime are not known to be strange bedfellows. Aiding and abetting crime is at the sub-structure of a lot of banking, worldwide. In Nigeria, for many of our bankers, It has never been about what the rule says or the spirit of the law. It has always been more about what can we get away with? What are the loopholes we can take advantage of?
It is even difficult to make a case against rogue banking in Nigeria as many of the Poster Boys in the industry, today seated atop huge fortune, were major players in rigging the system. They might have ‘moved’ on to other things, if they have really moved on, but the template fashioned to rob the customer, shareholders and the public purse is still in intact, inspiring new generations. It will take more than a Sanusi to finally dismantle the structure. What sets Nigerian banking apart from some of those who pretend at transparency, is the crude, in-your-face manner of some of its operations.
Take the business of forex – the process had been bastardised as far back as the days where transactions were done via telegraphic transfers. Many a fortune made in the last two decades or thereabout was from forex round-tripping among other siblings.
Over time, it became routine for international trade practices fashioned around the use of Letters of Credit, Bill of Lading, Form M to be breached by Bankers colluding with local Traders, as part of a well-heeled syndicate, with tentacles beyond the borders. The oil subsidy players worked to perfect the template. They so perfected the system, and made a kill from the forex trade and fictitious subsidy claims submitted to the PPPRA.”
The story of Banking in Nigeria dates back to 1891, even before the birth of Nigeria. First were the colonial banks, but indigenous backs showed up quite early, with attempts at that starting in 1929 with ICB only to fail in 1930, but National Bank (1933), Agbonmagbe (1945) and ACB (1947) soon finding their feet. They were to be a part of the era of ‘free’ banking, carried out without regulation, which lasted till 1952. Indeed, between 1950 and 51, about 18 banks were hurriedly set up, with 17 collapsing within a year. so, bank failure goes way back just as the story of criminal collusion and all sorts of nefarious in activities in Nigerian Banking runs way back. But, of course, it was nothing of the sorts that we began to witness since the 1990s, where the big boys have taken the ‘advice’ that the easiest way to rob a bank is to own one literally, robbing banks to the ground to fund their own choices.
It all started with Babangida following the leading by the IMF to implement the Structural Adjustment Programme (SAP) with liberalisation as one of its pillars, with deregulation of banking following suit. From the late 1980s to early 1990s, the financial space massively opened up, with many financial institutions licensed from ‘finance houses’ to banks. Between 1985 and 1992, the number of banks had ballooned from 40 to 120. Prior to the blow-up, the regulator was already struggling, but with deregulation it simply lost control, unable to catch up with the pace of development, some of which positively revolutionised banking, as competition forced early adoption of new technology. But then, manpower had been spread thin at level of management and operations, both on the part of operators and regulators, creating room for the Cowboys to take over. Those who were only middle Managers yesterday had become Bank ‘Owners’, even if at the time individual share ownership was limited to 5% before it was later increased to 10%. As at 1988, capital requirement to obtain banking licence was N6 million for merchant banks and N10 million for commercial, going up in 1990 to N12 million for Merchant Banks and N20 million for Commercial Banks.
With proliferation came money and new money men, some controlling 2-3 banks at the same time. With money came infighting, intrigues, boardroom politics leading to mismanagement, crises of all sorts, court actions, leading to distress and ultimately the collapse of many of these banks. Between 1995 and 2000, 33 banks lost their licences, with 26 of the 33 going down in 1998 alone. Before then, as the problems mounted, the CBN came up with the Prudential Guidelines and the government promulgated BOFID. Many of the Banks struggled to meet up with the provisioning requirements of the Prudential guidelines and they came tumbling down like pack of cards, with the CBN simply taking over for a nominal fee of N1, handing them over to NDIC, which had been set up. Many of the Banking Executives back then simply ran their banks aground throwing thousands of shareholders, depositors and staff into hell from which many have not recovered till today.
It was in that era that many today’s godfathers of Banking emerged. Some survived the 90’s but could not make it pass the 2000’s, with Soludo-consolidation catching up with some before the Sanusi tsunami came hard on others. But the truth is, nothing much really changed. Many simply dodged the Sanusi bullet. Some who were forced to relinquish their positions simply changed their attires, replacing themselves with stooges who continued to dance to external tunes, while the regulator struggles to catch up. Not much ever changed. Same people, same tricks.
By the time Sanusi stepped in, the affected banks were found to have given out N456 Billion as margin loans, with additional exposure of N487 Billion to the Oil and Gas sector, with non-performing loans at over N1 Trillion. The CBN then came up with over N 400 Billion bailout package. In a country where analysts debate N10,000 loan/grant to traders, the CBN routinely shells out hundreds of billions to bailout enterprises run aground by big boys. Privatisation of profits and socialisation of losses. But for AMCON which now prevents bank failure, depositors would have lost so much, thousands would have been out of jobs.
Sometime ago, one former Bank Chairman was found to owe the bank in which he chaired the board a measly N70 billion. His total exposure to different banks is put at N150 billion. He had on the table two DISCOs and one telecoms firm. We also found that only 350 accounts owed the banks N2.5 trillion, which represented at the time about 80 percent of the debt on the table of AMCON, which was taken over with public funds. Now, we are being told about another being exposed to a bank to the tune of N75 Billion or thereabout. CBN is speaking about different rounds of ‘forbearance’. We are reading about write-offs into hundreds of billions over a few years by a bank.
It was Babangida who gave us the Banks and the cowboys. It was Abacha who came to ‘clear’ the mess with Failed Banks Tribunal., a military-styled tribunal, even though under a civilian High Court Judge. The tribunal was the iron fist brought out to handle the rot that led to failure in banking, as individuals privatised assets of banks they purportedly owned. The Decree had 2 legs – Tribunal and a debt-recovery organ. It was a tough time. Many of the Bankers fled the country. as others were hauled into detention. Over 160 Banking Executives were in detention, a few convicted, while some were undergoing trial at the time Abacha passed on.
The Failed Banks (Recovery of debts) and Financial Malpractices) in Banks Decree, a watered-down version, now exists as the Failed Banks (Recovery of debts) and Financial Malpractices) in Banks Act 2004. It bears little resemblance with the Abacha decree which set 21 days, from day of first sitting for entering judgement in a a case. The decree also expanded on the definition of a director to include family members of the Director himself. It lifted the veil to go after persons behind the corporate screen and even attempt to commit, even if it failed, was a crime.
It was definitely no joke and the human rights community cried out, with allegations of high handedness and discrimination flying, even as it was difficult to make the fake from the genuine, a sit was the season of high political drama as Abacha doubled down on suppression of human rights following the annulment of the June 12 elections. The Failed Banks decree seemed to have been fashioned with the mind of ” since the hunter has learnt to shoot without missing, the bird must also learn to fly without perching.”
With all that has transpired in our Banks over the years, especially of late, it is obvious that the hunters have perfected the art of shooting without missing, the birds must, in the interest of protecting depositors, monetary and financial stability and efficient financial system and some level of investor protection, find a way of flying without perching. The Abacha template might be one to look at again, with respect to setting up a dedicated Banking Malpractices Tribunal, given the critical place of Banking in the economic development and the refusal by our Bankers to play the role. We need the Tribunal to save Banking from the hands of Bank ‘owners’ and their friend whose primary interest appears to be that of owning banks to rob them while exploiting labour, access to cheap funds, cornering depositors funds, privatizing profits (real and paper), while socialising losses, leaving empty plates for AMCON and Nigerians to clean after their acts. Time to resurrect the Abacha template? Even the AMCON Boss was once quoted to have made the call. It is not enough to secure depositors funds at enormous country to Nigerians, acts that are blatantly criminal have to be speedily handled as such by a dedicated court with timeline for judgement, as laid out in the Decree, otherwise the cycle will continue. We just might be needing Abacha to save the Banks from the Bankers.
-Simbo Olorunfemi, writer, journalist and public affairs analyst, writes from Lagos