Thank you Sanusi, you’ve made us proud

Memories are short, and we often gloss over aspects of them that are inconvenient to remember. Without Yar’adua, it is doubtful if the Nigerian ruling class, especially the financial clique controlling our capital and money markets, would have allowed SLS to be appointed to CBN as Governor in the first place. True, everyone was concerned […]

Memories are short, and we often gloss over aspects of them that are inconvenient to remember. Without Yar’adua, it is doubtful if the Nigerian ruling class, especially the financial clique controlling our capital and money markets, would have allowed SLS to be appointed to CBN as Governor in the first place. True, everyone was concerned that the financial system was then in serious crisis but they would have preferred to muddle through. Charles Soludo, then head of the CBN, was busy assuring everyone that all was well. But that was blatant self-deception, and something drastic needed to be done.
In order to fully grasp what happened to our financial system in the last four years under SLS, we need to look at what a financial market really is. For those not very familiar with the term, essentially, it is just a market we all go to buy or sell funds. It can be split into capital market and money market. The money market (mainly banks) deals in the lending and borrowing of short-term finance (i.e., for one year or less), while the capital market (stock exchanges and pension funds) deals in the lending and borrowing for long-term investment (i.e., for more than one year).
The Central Bank regulates the money market, of which it is a part, (as well as being the main banker to the central government); the Securities and Exchange Commission regulates the capital market. Even those of us who simply keep our money in banks are part of this system because it is our deposits that the banks lend out, and if the borrowers can’t repay we may lose our meagre savings. If we suspect that our deposits are not safe we are likely to run to the bank and try to pull them out. When we buy shares in quoted companies and we suspect those companies would get into trouble we rush to sell those shares. It is around these that the crisis of 2009 revolves, and where our story should begin.
When Yar’adua took over the stock market was already in trouble. Its capitalization (total value) had nosedived from an all-time high of N13.5 trillion in March 2008, to less than N4.6 trillion by the second week of January 2009, and everyone was trying to sell and nobody was buying all the overpriced shares on offer. Though the owners of the Nigerian Stock Exchange (yes, it is a private company) were behaving like casino lords encouraging everyone to gamble, the real culprits were the banks who joined the rip-off game. They were financing about 65 per cent of the stock market activities through “margin facilities” granted to investors, stock broking firms and selected customers, to buy shares whose prices were deliberately being manipulated. These banks had even abandoned their “core business” of lending to traders, manufactures and others in the real sectors of the economy. They were putting our deposits at risk. Investors could not borrow except at very high costs.  
What are “margin loans” anyway? These were loans banks were encouraging everyone to take and buy shares with. Borrowers were required to contribute about 30 per cent, while the banks contributed 70 per cent, and the entire amount was used to buy dubious shares (mostly the bank’s own shares) that we were misled into assuming will keep going higher and higher.
Well, the share prices collapsed because the companies and banks we were part-purchasing were not really doing well and the prices were artificial. The resulting market meltdown wiped out the investors’ 30 per cent contribution and almost half of the banks’ 70 per cent they lent us. The banks resorted to calculating interest on daily basis and posting the debits to the account of investors, stock broking firms, and sundry borrowers, thus creating perpetual liabilities on the borrowers. The borrowers could not pay back these loans. Nor would anyone buy the worthless shares even after heavy discounts.
It was initially estimated that the total exposure of the banks to the capital market in terms of trapped funds was in excess of N1 trillion. Over N2 trillion of pension assets also went down the drain in this casino capitalism. Even the stockbrokers could not settle their clients for the few securities they managed to sell. One analyst observed that “the capital market place became overheated with so much speculative activities of banks that by the time the market caved in, it became difficult for them to exit through the narrow door as there were no mega investors to check them out,” Not only could the banks no longer lend, but their very existence was under threat.
With about N3 trillion in non-performing loans, disappearing deposi-tors’ fund, loss of confidence in the banks and the stock market, even the banks’ investors were getting jittery. This was why, on June 3, 2009, Yar’adua made Sanusi Lamido Sanusi Governor of the Central Bank of Nigeria, because the risks were becoming systemic and the major players were in denial.
What Sanusi Lamido, and the CBN, NDIC and others working with him, did is now history. We do not have to tell anyone that the banks in Nigeria are now safer and very reliable. The guilty ones who perpetuated the frauds and almost engineered a financial crash may not have been punished to our satisfaction, and there are still many areas that still require attention, but the young man left the financial system better than he found it; much, much better. Even the stock market has gotten the message. We can all go to sleep knowing our money, if we have any in the banks or in quoted companies, indeed in safe hands. For that alone he deserves our thanks.
Let us not lose focus however. We must insist that NNPC be fully audited, be made to stop payments and expenditures without “appropriation”. The CBN should remain as independent of the executive as legally envisioned. Oga GEJ, money is being stolen (or unremitted); at least $20 billion has been mentioned. The solution should be to recover the money and punish those responsible, not go after the whistleblowers.
Don’t cry for SLS, cry for a country where people are afraid to speak out.