Omoh Gabriel
5 November 2009
THE Central Bank, CBN, yesterday, raised an alarm on rising cases of fraud in the nation's financial institutions even as it granted the request of shareholders of Equatorial Trust Bank Limited to recapitalise the bank, following a proposal by the bank's shareholders to the apex bank.
The CBN said that as at December 31, 2008, a total 1,974 cases of fraud and forgeries, amounting to N24.49 billion and various other sums in foreign currencies were reported by banks.
According to the CBN in its 2008 Banking Supervision report, 746 of the cases amounting to over N6.37 billion were reported to have been successful. Arising therefrom, 316 staff of the banks were dismissed and 220 others had their appointments terminated.
Reviewing the non-performing loans in the banks in 2008, the CBN said "Non-performing credits increased from N0.4 trillion in 2007 to N0.5 trillion in 2008. The ratio of non-performing credits to total credits of 6.26 per cent during the review period was far below the trigger level of 35 per cent for setting up a Crisis Management Unit as stipulated in the Contingency Planning Framework for Systemic Distress.
"The ratio was lower than 21.6 per cent, 18.12 per cent, 8.77 per cent and 8.44 per cent recorded in 2004, 2005, 2006 and 2007, respectively. Provision for bad and doubtful debts grew from N0.2 trillion in 2004 to N0.4 trillion in 2008.
The ratio of bad debt provision to total credits was 22.6 percent in 2004; 19.1 percent in 2005; 6.3 percent in 2006; 8.1 percent in 2007 and 6.1 percent in 2008".
According to the CBN, "In many of the banks, Board and Management oversight needed improvement as evidenced by lapses in risk asset quality, corporate governance and abuse of insider-related facilities.
"Most of the banks reported increased earnings and profitability due to increased lending and business diversification. The crisis in the capital market threatened the liquidity in the banking system due to banks' exposure to margin loans.
The CBN took some actions, such as the stoppage of liquidity mop-up and reduction of liquidity ratio from 40 per cent to 30 percent, to assist banks in their liquidity management.
"Some of the banks had their foreign lines reviewed downward by their foreign correspondent banks, which reduced supply of foreign exchange in the market and exerted pressure on the exchange rate."
According to the report, "The minimum liquidity ratio for banks was reduced from 40 to 30 percent during the year. Compliance with the prescribed minimum liquidity ratio of 30 and 60 percent by banks and discount houses respectively, was closely monitored on daily and monthly basis. Two banks failed to meet the minimum prescribed liquidity ratio of 30 percent in the month of December 2008. Compliance with the capital adequacy ratio requirement of banks and discount houses was also monitored throughout the year. In the month of December 2008 two banks failed to meet the minimum prescribed capital adequacy ratio of 10 per cent."
Returns ETB to shareholders
In a statement signed by the M.M. Abdullahi, Head, Corporate Affairs, CBN said "having reviewed the terms and conditions of the Deeds of Covenant, the CBN has consented to the request aimed at further strengthening the bank. In granting these requests, CBN noted that the Special Examination had not raised issues of serious supervisory concern or criminal activity by any member of the Board of ETB.
However, the CBN will closely monitor the implementation of the terms of the Covenant to ensure that the lapses are fully rectified and in the overall interest of the banking system."
In the statement, the CBN further said "Following the special examination of all banks operating in the country, and the subsequent actions by the CBN, the shareholders of Equitorial Trust Bank Limited requested the permission of the Central Bank of Nigeria to be allowed to rectify lapses identified in the bank.
In pursuance to that, the shareholders executed a Deed of Covenant, the specific terms and conditions of which included the following:
"The willingness of the shareholders to recapitalise the bank by way of injection of additional capital latest by June 30, 2010; restructuring, diversification and enlargement of the capital base of the bank either by way of a public offering of shares, securing a core investor or merger with a local bank within one year period; addressing the corporate governance issues in the bank which were mainly ascribed to the previous Executive Management team in the bank; reconstitution of the Board of Directors of the bank through the retirement of two non-executive directors and the appointment of four new non-executive directors, including Dr. Mike Adenuga Jnr. (CON), an erstwhile member of the board, subject to the approval of the Central Bank of Nigeria; and Convening a general meeting of the bank's shareholders to ratify, through a resolution all the nominated appointments to the bank's board".
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In my over 30-years of watching and observing the perfunctory management of the Central Bank, this I should say, is the first time the management of the bank is actually speaking and addressing cogent issues that the bank should have been keenly aware of. Nigeria is finally growing up. Sanusi, unlike many others before him, have finally de-personalized his appointment, as those before him seemed to relish in hollow accolades of being seen in the public as the "CBN Governor". Mallam Sanusi is actually taking his job seriously and should be commended for ushering in the management styles of the bank into the 21st Century. He is not running the bank as a private enterprise. He, I am surprised, is actually putting Nigeria first in his policy decisions. Maybe, through his examples, the neferious elements who had over-used the name of our Central Bank in numerous commercial undertakings would now stop.
The role of the Central Bank is not to engage in commercial activities with the "general public", as many of these bogus documents have seemed to portray. The role of the Central Bank is to engage in policy-making decisions with regards to the financial health of the nation by enforcing regulatory policies as set forth in the Constitution by working in tandem with Banking Committees set forth by the country's legislative bodies. In it, every top management or executive position MUST be vetted by the Senate or House of Reps Banking sub-Committee. Through this means, the mental health of the individual seeking appointment must be examined to ensure that such persons do not have hidden agendas for wanting to work with the Central Bank.
Furthermore, appointments to the Central Bank should not necessasily be based on some political considerations such as geopolitical zoning or character building categorization of the nations ethnic make-up. Even though it may be necessary in some form so as to avoid collusion. But, all appointments should be based strictly on qualification and a wanton desire to rid Nigeria of the indices of avarcious mentality and inauspiciousness that the rest of the world had heretofore, used as a benchmark for defining Nigeria. Our first love and moral obligation is to seek always to protect the image of Nigeria. No ethnic leaning or linguistic preference or religious affiliations should be used as a barometer for deciding how Nigeria should be governed. Those who use language as a means of solidifying their political affinity or as a means of defining Nigeria have yet to understand the essence of a true democratic system. A leader is someone who seeks common grounds for purposes of ensuring that those that are led are able to relate to them. The essence of leadership, therfore, lies in an ability to communicate with the general public. In order to seek a national office, leaders must develop the sense of adaptability especially in a culturally heterogenous environment (liguistically speaking) like Nigeria.
Without deviating wholly from the subject of this article, I would hope that Mr. Sanusi would take heed to these suggestions, as he attempts to clean up the accumulated mess which many of his predecessors had left untouched. In matters pertaining to the image of the country, there should be no sacrificial cows. Every mess should be expunged, and employees whose activities run counter to the goals of the Central Bank must face criminal prosecution. I might also add that Mr. Sanusi should attempt to codify the bank's stationeries whereby, it would be easy to detect from whose department Central Bank's letterheaded correspondences are found floating the world-wide web. The damage done to the image of the country through these neferious acts are sometimes so disheartening that many Nigerians find themselves running for cover.
In summation, however, I am totally in agreement with the steps Mr. Sanusi is taking to rid Nigeria's Central Bank of the negative images which the civilized world have used to define the entire nation. A word of caution: I would be the first one to critisize Mr. Sanusi if I were to see him overstep his constituted bounds. This is the essence of a democracy. As long as he seeks consent of the National Assembly for the institution and enforcement of his policies, Mr. Sanusi would have no problems from me. Nigeria is too diverse a country for an individual to want to act as the lone ranger. Military dictators attempted to rule by fiat without going through a robust democratic process, and the result was immeasurably devastating to the entire nations social, political and economic system. We are just now beginning to see democracy at work, and that my friends, is how a country should be run.