Abuja — To enhance close monitoring and ensure that no bank goes out of its way to violate banking procedures again, the Central bank of Nigeria and the Nigerian Deposit Insurance Corporation have posted resident examiners to all the 25 banks in the country.

will be reporting daily financial transactions to the two regulatory bodies.

Both the CBN and the NDIC are sending their officials to the banks in a bid to tighten financial security and guarantee that the banks follow due process in all their transactions, LEADERSHIP has gathered.

A top official of the NDIC confided in our correspondent yesterday that the resident examiners will play key and strategic roles in collaboration with the management of the respective banks to ensure smooth operation and guarantee safety of depositors' money, through the use of the EFASS software, which was developed exclusively by the CBN.

He commended the CBN for its action and said the EFASS facility granted automatic transfer of every single transaction by banks.

He said the examiners would monitor and ensure compliance of the banks to existing procedures.

"Both our officials and those of the CBN have already been posted to all the banks. While the CBN uses its EFASS to monitor and track daily financial transactions, the NDIC will provide insurance shelter and cover to the monies in deposit. This is to restore confidence of the sector and to make sure what happened does not occur again", he said.

According to the source, who pleaded anonymity, the intervention of the new CBN leadership in the recent crisis saved the financial sector from imminent collapse as the affected banks would have reached a level of distress.

He gave assurance that the CBN would not allow any of the living banks to collapse or experience any problem, hence the sacking of their leaderships. He urged Nigerians not to give any ethnic or regional coloration to what was happening as it affected every Nigerian depositor, regardless of where he or she came from.

The CBN has injected N400 billion into five banks in the country following the decision to remove the CEOs and executive directors of Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Finbank Plc and Afribank Plc last month.

The CBN has said that following the audit exercise conducted by its examiners it was discovered that five of the banks had accumulated margin loans of N500 billion, among other loans, that had gone bad and eroded their shareholders' funds.

"Some of these banks are quite large institutions and they have been mismanaged, so we had to move in to send a strong signal that such recklessness on the part of bank executives will no longer be tolerated", CBN Governor, Malam Sanusi Lamido Sanusi, had said.

He said the CBN had obtained the approval of the President to inject N400 billion into the affected banks to shore up their tier 2 capital to minimum acceptable levels.

Defending the CBN's position before the House of Representatives last week, Sanusi added that the funds being injected by the CBN was just temporary and did not translate to the government taking a stake in the banks, as the interim management would be given a period to recapitalise the affected institutions, following which the N400 billion would be paid back to the CBN.

The CBN, he stated, was ready to ensure that no bank collapsed in the country, but would encourage them to seek funds to raise fresh capital and merge with stronger banks.

The CBN had since constituted interim managements and boards for the affected banks to run the institutions until they are taken over by new management teams and owners.

Meanwhile, the CBN yesterday opposed the call for the amendment of the CBN Act, saying there was no conflict between the relevant sections of the Act regarding liquidity management/liquidity support for distressed banks and the relevant sections of the constitution regarding appropriation by the National Assembly.

Section 80(1) of the 1999 Constitution says that all government expenditure should be appropriated by the National Assembly.

The bank said in a statement issued by the head of corporate affairs of the bank, Mr. Mohammed Abdullahi, that any attempt to amend the CBN Act would amount to preventing the CBN from playing its role of lender of last resort. This, it warned, "will not only be counter-productive but unprecedented in the history of central banking in the world as this would simply make it difficult for the Central Bank of Nigeria to perform its vital role of ensuring the safety and soundness of the financial system".

The apex bank added: "There is no central bank in the world that has to have appropriation from the legislature to perform the vital functions of lender of last resort.

"And while it is not all central banks that have the mandate to directly supervise banks or even print currency, all central banks have responsibility for monetary policy/price stability, of which the lender of last resort function is a critical component.

"It should also be noted that this function is similar to the Ways and Means Advances the CBN is statutorily authorised to extend to the Federal Government to cushion temporary budget deficiency under the CBN Act."

Apparently, the apex bank was referring to the recent call by some sections of the public and the legislature that the recent injection of N420 billion by the CBN without recourse to the National Assembly was in conflict with the constitution.

In its statement yesterday, the bank pointed out that its core mandate included monetary policy formulation and implementation and the promotion of a sound financial system.

"It was in pursuance of these objectives that the CBN provided liquidity support to the five banks. The injection of N420 billion into the five affected banks is neither equity nor a bailout by government but the normal and statutory central banking function of lender of last resort to deposit money in banks facing acute liquidity problems.

"The loan is an accommodation facility intended to improve the liquidity position of the banks to enable them meet their obligations and will be repaid."

According to the bank, "The CBN Act empowers the CBN to manage money supply in the economy through different mechanisms. The CBN, as banker to other banks, has been increasing money supply by lending money to the banks through the Expanded Discount Window (EDW) and the injection of the N420 billion into the five banks is similar to that function.

"The money is not from the government treasury and the CBN does not require any appropriation by the National Assembly in order to perform this function, which, in any event, is not often foreseeable."

It argued further that the Nigerian constitution authorised the expenditure of public fund outside the Consolidated Revenue Fund of the Federation and outside appropriation, provided such expenditure was authorised by an Act of the National Assembly, adding that Section 42(2) of the CBN Act was an Act of the National Assembly.

In a related development, following the reservations expressed by the House of Representatives over the N420 billion bailout to five banks by the CBN, its Committee on Justice has petitioned the Attorney- General of the Federation and Minister of Justice, Chief Michael Kaase Aondoakaa, over the constitutionality of the funds.

It called on the AGF to propose an emergency Appropriation Bill, pursuant to Section 83 of the 1999 Constitution, to establish a Contingency Fund from which the governor of the CBN could draw to meet the exigencies of the present bank crisis, as well as in the future.

In a petition addressed to the AGF, the committee described as "a dangerous proposition" the argument of the CBN governor that he was empowered by the law to deploy such funds without appropriation and legislative approval.

It argued that the CBN erred in its unilateral decision to print the said money and inject same into private enterprises in which the Federal Government had no proprietary interests.

The petition, signed by the committee chairman, Hon. Henry Seriake Dickson, maintained that such an intervention could only be lawful after the National Assembly-the representatives of the Nigerian people-had been consulted.

Although the committee admitted that the CBN governor under the CBN Act and the Banks and Other Financial Institutions Act (BOFI) had enormous powers to exercise over the banks, he lacked powers under the law to deploy public funds into private businesses without due authorisation from the National Assembly.

Dickson said the circumstances under which the N420 billion was paid was not an ordinary loan but "a monumental policy decision" outside the scope of the CBN Act and the BOFI Act.

He said the action of the CBN, with respect of the bailout amounted to not only a breach of the constitution and distortion of the nation's economic order but a usurpation of the powers of the National Assembly.