Conspiracy theorists and CBN’s cleansing exercise
As is often the case with our dear country, some conspiracy theorists are theorizing about a pro-Northern agenda while rumour mongers are clutching at nonexistent straws, trying to tarnish the image of a supposedly ‘Northern’ bank (which unbeknownst to many has large southern shareholding) simply because the bank doesn’t usually make much noise. Unfortunately for […]
As is often the case with our dear country, some conspiracy theorists are theorizing about a pro-Northern agenda while rumour mongers are clutching at nonexistent straws, trying to tarnish the image of a supposedly ‘Northern’ bank (which unbeknownst to many has large southern shareholding) simply because the bank doesn’t usually make much noise. Unfortunately for some myopic Nigerians, nothing is too puerile to be left unsaid.
A few questions here: With regards to the action taken against the five banks, what is the pro-Northern agenda in the removal of their MDs and EDs? Are Northerners the owners of the banks that were cleared? Are Northern Nigerians the only depositors whose life savings and hard-earned resources are at risk?
And what are we to make of the inclusion of individuals of Northern extraction amongst the sacked bank executives? Are we to play the ostrich and bury our brains in the sands of wrong-headedness, ignoring the fact that none of the MDs of the cleared banks is a Northerner and none of the newly appointed MDs is a Northerner?
The most straightforward fact of this matter is that some Nigerian banks are burdened by toxic assets having exposed themselves to immense margin loans, unsecured credit lines to the oil and gas sector and other lax corporate governance practices. It’s now well-known that the origins of many of these toxic assets lie in the margin loans that some banks gave to individuals to purchase shares with those shares serving as collateral. And where did the banks themselves get the money to play what amounted to ‘economic lottery’ with? Conspiracy theorists do not want to be reminded of it but the unassailable truth is that these banks did not only use depositors’ funds; they also went to the capital market and deployed razzmatazz to hoodwink Nigerians into parting with their hard-earned money! Now CBN has stepped in to safeguard people’s savings and conspiracy theorists are theorizing about an ethnic agenda. This is laughable.
The school of thought that argues the five banks’ executives should have been given time to salvage the situation have failed to take into consideration that erstwhile CBN governor, Charles Chukwuma Soludo, opened the Expanded Discount Window (EDW) last September to shore up the banks’ liquidity and give them room to manoeuvre out of troubled waters. But what happened? According to the CBN, between October 2008 and July 2009, the banks whose executives were removed accounted for 90 percent of transactions at the EDW while the rest accounted for a mere 10 percent. Other banks in the systems were already refusing to lend to the troubled banks until CBN had to step in and guarantee the inter-bank market. Additionally, the balance sheets of the five banks had shrunken, their shareholders’ funds had become impaired and it was clear to the CBN that they had liquidity problems.
Should the apex bank have looked on and done nothing? Those conspiracy theorists accusing the CBN of serving an ethnic agenda have conveniently chosen to forget that a number of these banks only recently wrote off huge sums of margin facilities in excess of the 420 billion naira the CBN had to use to shore up the banks.
Only mischievous elements with too much free time on their hands will fail to see that what the CBN has done is to nip the problem in the bud and save Nigerians from another round of failed banks trauma. Indeed, as the apex bank struggles to instil market stability and confidence into the financial sector, it is only wise and proper that the right steps should be taken no matter whose ox is gored.
As a final thought, maybe it should be clear that the CBN must not shy away from meting out the same treatment to other bank executives if they are found wanting after the entire auditing process. CBN should not also shy away from punishing CBN staff that had supervisory roles over the banks whose executives have been sacked. This carrot and stick method of the bailout ought to deter other CEOs from taking mind-boggling risks, like dabbling in perilous but juicy-looking oil and gas portfolios, which tend to overexpose their financial institutions to potential failure.