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 of our bankers to live up to the requsite billing. We need such a Tribunal to save banking from the hands of bank ‘owners’ and their friends…
As I ruminated the other week over the N21 billion Cosmas Maduka-Ifeanyi Ubah-Access Bank fiasco, one of the intriguing things that stood out for me, 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 when it is director-related. As well-meaning as Dr. Maduka might have been, there was little doubt, from the story he told, that he was in breach of the guidelines and he would still have been, even if things had gone well. Unfortunately things didn’t go well, leaving a hole of N21 billion in the books of the bank for the Asset Management Corporation of Nigeria (AMCON) and Maduka to take care of. The Central Bank of Nigeria (CBN) sanction of the bank and two of its directors about that time might not have been unrelated to this transaction, even if it was only a slap on the wrist, in the light of the huge risk posed to the system.
What it confirms, as we have only just found out with First Bank, is that in spite of the regulations, rules, codes and the law that govern banking, the banks continue to function more like back pockets for bank directors, some privileged shareholders, their friends and families. These ones freely dip hands into their back pockets to fund whatever venture catches their fancy. When they are done, they simply tear the back pockets and move on elsewhere, at great costs to other shareholders, staff and many times, Nigerians, who are forced to bear the cost of whatever ‘forbearance’ or ‘bailout’ package is 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 itself 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, seated atop huge fortunes today, 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 foreign exchange (forex) – the process had been bastardised as far back as the days when transactions were done via telegraphic transfers. Many a fortune made in the last two decades or thereabout was from forex round-tripping, among other sibling crimes. 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 consummated the system, and made a kill from the forex trade and fictitious subsidy claims submitted to the Petroleum Products Pricing Regulatory Agency (PPPRA).
By the time Sanusi stepped in, the affected banks were found to have given out N456 billion as margin loans, with the additional exposure of N487 billion to the oil and gas sector, as non-performing loans were put at over N1 trillion. The CBN then came up with over N400 billion as a bailout package to save the banks.
The story of banking in Nigeria dates back to 1891, even before the birth of the country. First were the colonial banks, but indigenous banks also 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 African Continental Bank (ACB) (1947) found their feet. They were part of the era of ‘free’ banking, carried out without regulation, and which lasted till 1952. Indeed, between 1950 and 51, about 18 banks were hurriedly set up, with 17 collapsing within a year. As such, bank failure goes way back in our history, just as the story of criminal collusion and all sorts of nefarious activities in Nigerian banking runs way back. But, of course, it was nothing of the sorts that we began to witness, starting in the 1990s, with the ‘big boys’ taking the ‘advice’ that the easiest way to rob a bank is to own one, literally; then robbing it to the ground to fund one’s greed.
It all started with General Babangida, following the lead of the International Monetary Fund (IMF) to implement the Structural Adjustment Programme (SAP), with liberalisation as one of its pillars, and deregulation of banking following suit. From the late 1980s to early 1990s, the financial space opened up massively, with many financial institutions licensed, ranging from ‘finance houses’ to banks. Between 1985 and 1992, the number of banks had ballooned from 40 to 120. Indeed, 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 the early adoption of new technology. But then, manpower was spread thin at the levels of management and operations, both on the part of the operators and the regulators, creating the room for the ‘Cowboys’ to take over. Those who were only middle managers yesterday had then become bank ‘owners’, even if at the time individual share ownership was limited to 5 per cent before it was later increased to 10 per cent. As at 1988, the capital requirement to obtain a banking licence was N6 million for merchant banks and N10 million for commercial banks, later going up to N12 million for merchant banks and N20 million for commercial banks in 1990.
With the proliferation came money and new ‘money-men’, some controlling two to three banks at the same time. With money came infighting, intrigues, boardroom politics, gross mismanagement, crises of all sorts, court actions, etc., leading to distress in the sector, with the post-June 12 economic and political crises contributing to the collapse of many of these banks. Before then, as the problems mounted, the CBN came up with the Prudential Guidelines and the government promulgated the Banks and Other Financial Institutions Decree (BOFID). Many of the banks struggled to meet up with the provisioning requirements of the Prudential Guidelines, but they came tumbling down like packs of cards, with the CBN simply taking over for a nominal fee of N1, and handing them over to Nigeria Deposit Insurance Corporation (NDIC), which had been set up. Between 1995 and 2000, 33 banks lost their licences, with 26 of the 33 going down in 1998 alone. Many of the banking executives back then simply ran their banks down, throwing thousands of shareholders, depositors and staff into hell, from which many have not recovered till today. There was no AMCON then to take over toxic debts and avert bank failure.
It was in that era that many of today’s godfathers of banking emerged. While some survived the 1990s but could not make it pass the 2000s, with the Soludo era consolidation catching up with some, the Sanusi tsunami came hard on others. But the truth is that nothing much has fundamentally changed, even if the adoption of new governance codes might lead one to assuming that there has being some seismic shift. Some of those who survived 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. Indeed, not much could have changed. Its a new dawn, but the same people, old tricks, and the same results.
By the time Sanusi stepped in, the affected banks were found to have given out N456 billion as margin loans, with the additional exposure of N487 billion to the oil and gas sector, as non-performing loans were put at over N1 trillion. The CBN then came up with over N400 billion as a bailout package to save the banks. In a country where analysts debate the propriety of N10,000 loans to traders at the bottom of the pyramid, the CBN routinely shells out hundreds of billions of naira to bailout enterprises run aground by big boys who have perfected the art of privatising profits and socialising losses. But for AMCON, which now prevents bank failure, depositors in some of the banks in distress would have lost so much and thousands would have been out of jobs, due to the greed of a few.
It was General Babangida who gave us the banks and the cowboys. But it was General Abacha who attempted to ‘clear’ the mess with the Failed Banks Tribunal he set up, a military-styled court, even though under a civilian high court judge. The tribunal was the iron fist brought out to handle the rot in banking, as individuals privatised the assets of banks they purportedly owned.
Sometime ago, one former bank chairman was found out to be owing the bank whose board he chaired a measly sum of N70 billion, which sent the bank into a coma, with shareholders losing their investments. The total exposure of this man to different banks was put at N150 billion. We were to find out that, indeed, only 350 accounts owed the banks N2.5 trillion, which represented, at the time, about 80 per cent of the debt on the table of AMCON, taken over with public funds. Now, we are being told that there is another man exposed to one bank to the tune of N75 billion or thereabout. Who knows to what extent he might be exposed to other banks? CBN is speaking about different rounds of ‘forbearance’ for the bank in question. We are also reading about write-offs running into hundreds of billions of naira, over the last few years by the same bank.
It was General Babangida who gave us the banks and the cowboys. But it was General Abacha who attempted to ‘clear’ the mess with the Failed Banks Tribunal he set up, a military-style court, even though under a civilian high court judge. The tribunal was the iron fist brought out to handle the rot in banking, as individuals privatised the assets of banks they purportedly owned. There were two different arms for tackling the mess – a tribunal and a debt-recovery organ. Indeed, it was a tough time. Many bankers fled the country at the time, as others were hauled into detention. Over 160 banking executives were remanded in detention, a few convicted, while some were undergoing trial at the time General 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 to the Abacha decree which set 21 days, from the day of first sitting of the tribunal, for entering judgement in a case before it. 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. The attempt to commit fraud, even if it failed, was treated as a crime by the Decree.
It was definitely no joke and the human rights community cried out, with allegations of high-handedness and discrimination flying around, even as it was difficult to make out the fake from the genuine, as it was the season of high political drama, with Abacha doubling down on the suppression of human rights following the annulment of the June 12 election. But the Failed Banks Decree seemed to have been fashioned with the mindset 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, and for that reason, the birds must, in the interest of protecting depositors, monetary and financial stability, and also securing an 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 of our bankers to live up to the requsite billing. We need such a tribunal to save banking from the hands of bank ‘owners’ and their friends, whose primary interest appears to be that of owning banks to rob them, while exploiting labour, accessing cheap funds, cornering depositors funds, privatising profits (the real ones and those on paper), while socialising losses and leaving empty plates for AMCON and Nigerians to clean up after them. The AMCON boss was once quoted to have made the call for the resurrection of the Failed Banks Tribunal. I would think it is the right thing to do. It is not enough to secure depositors funds at enormous costs to Nigerians, acts that are blatantly criminal have to be speedily handled as such by a dedicated court with a strict timeline for judgement, as was laid out in the Failed Banks (Recovery of debts) and Financial Malpractices in Banks Decree, otherwise the cycle will continue. We just might be needing the Abacha tribunal template to save the banks from the bankers.
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