Last week in this column, I offered essentially my personal reflections in the wake of the Lamido Sanusi bombshell which led to the CBN dismissal of the CEO and Executive Directors of three of our largest banks-Union Bank (Bartholomew Ebong), Intercontinental Bank (Erastus Akingbola), Oceanic Bank (Cecilia Ibru), and two others, Afribank-which used to be one of our “big 4” banks before it fell from grace (Sebastian Adigwe) and Fin Bank (Okey Nwosu). On Friday, August 14 2009 when the Tsunami hit, I was interviewed through telephone by three newspapers and one radio station, and later that night by Silverbird TV as the main item on its late night news. The next day, I was on Channels TV’s early morning discussion programme and a day later on TV Continental discussing the same issue, as well reflecting how the banking shocker took over the media and private discussions of most Nigerians.
In all those discussions, I chose to focus on the technical aspects of the matter rather than the unfolding allegations of a “Northern Agenda” which continue to trail Lamido Sanusi’s actions. Knowing Sanusi, I find it difficult to think that he would act essentially driven by parochial considerations, rather than the merits of a matter. I also do not think it is in our interests as “Southerners” to suggest that while we complain about public sector corruption, we are more tolerant or ambivalent about private sector corruption, or at least allegations thereof. I am certain there is no Southern agenda of fraud, ostentation, corporate abuses or financial misdemeanour. Nevertheless I am concerned about the trend towards a wholesale criminalisation of borrowing, entrepreneurship or venturing that may be an unfortunate side effect of the unfolding saga.
On the TVC phone-in segment for instance, viewers reacted negatively to my point that borrowing or owing is not in itself a criminal matter. It is only where some specifically criminal activity (such as fraud, false representation, diversion, money laundering, insider dealing etc) is implicit or explicit in the transaction that criminal liability may attach. Indeed even cases of inability to repay a debt, for instance because a business venture has failed, normally attracts civil liability enabling the creditor to sue, appoint a receiver, sell pledged assets, execute judgment against corporate or personal assets or other such remedies. Therefore I am concerned about resort to publication of debtors names in the newspapers or inviting the EFCC into purely banker-customer relationships except as I have already pointed out, where a crime is alleged.
In relation to the substance of the matter, several arguments have been made over the last three to four years in this column concerning the direction of our financial sector. In a two-part serial, “Banking Consolidation…and then what?” published on January 25 and February 1, 2006 right after the consolidation exercise, I argued that “simply consolidating the industry will not automatically put an end to all the problems therein. Like they say, it is not yet Uhuru! Many of the Banks suffered from poor corporate governance and weak institutional capacity, low skill levels, weak processes and standardization, weak management information systems, sub-optimal utilization of technology, amongst others-in addition to low capital which recapitalization and consolidation has addressed. Crucially the concept of who a good banker is has changed from a trained, thinking, careful person of very high integrity to what in effect has become some thing resembling a clever, aggressive, “sharp” and unscrupulous person. Consolidation will not change that!”
In “Nigerian Banking: Differentiating or Commoditising?” (August 1, 2007), I warned against the increasing homogenous industry behaviour I observed. Banks were abandoning unique strategies in favour of herd behaviour noting that “since July 2004, most Nigerian Banks have done largely the same things-raise capital, merge with or acquire other institutions, change names, logos or colours, build many branches, buy ATMs and build e-commerce capabilities, increase retail market penetration, establish subsidiaries, go back to raise more money and open branches in West Africa and beyond-such that unique competitive positions are more difficult to sustain”. Indeed in that same article, I recounted the usual sequence in commoditized industries which our banks were likely to fall into once they were undifferentiated-“The classic sequence then is for price competition to ensue, margins to drop, and in the specific context of banking, imprudent loans and transactions to be booked.” Unfortunately that prediction turns out to have been more than accurate!
These arguments were subsequently repeated over and over again in more than twelve articles. In “The Banking Industry in 2008” (February 20, 2008), I complained that the industry imperatives at the end of consolidation (“stronger corporate governance, professional ethics and transparency in financial reporting, stronger regulation, tighter credit standards …strengthening capacity-human, risk management, information technology and systems and processes…”) were ignored in favour of a second round of capital raising, which I considered an error. I very recently re-stated these points in my “Reflections on Nigerian Banking”, Parts 1-3 published in March. In “Memo to Lamido Sanusi” (June 10, 2009), I identified Sanusi’s short-term priorities as CBN governor as dealing with foreign currency and reserves management, restoring macroeconomic confidence and “resolving concerns around financial sector soundness and health, including asset quality, provisioning, risk management, transparency and professional ethics”
My only regret is that the banking industry failed to take these good faith warnings seriously to everyone’s unfolding anguish!
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