BUSINESS

Then came another three
11/06/09, Biodun Omojola

"Hurricane" Sanusi claims more bank chief executives as Central Bank governor tries to restore confidence and good governance to the sector.

Barely six weeks after "Hurricane Sanusi" first made landfall in Nigeria's financial sector, it has again, landed with the same devastating force, claiming another three bank CEOs, after the completion of the much anticipated second phase of bank audits. Sanusi Lamido Sanusi, governor, Central Bank of Nigeria, had ordered an audit of all banks operating in Nigeria upon assuming office. In the first phrase, 10 banks were involved with five identified as weak. Their CEOs were removed while the banks received an injection of government funds. The second phase threw up another five weak banks but only three CEOs were sacked. The sacked CEOs and banks are Francis Atuche, (Bank PHB), Charles Ojo (Spring Bank) and Ike Oraekwotu (Equatorial Trust Bank).

CBN, in sacking the CEOs, said the "special examination primarily focused on assessing the health of the banks with particular focus on liquidity, capital adequacy and corporate governance." Of the five identified, four were said to be "in grave situation" but only three received the Sanusi treatment. The two spared are Wema Bank, also identified as being "in grave situation" and Unity Bank. Wema was spared because it is under a new management and Unity, because it is sufficiently liquid although it has insufficient capital. Both were advised to recapitalise latest June 2010. Unity Bank had actually not presented its audited accounts for two years.

With the second audit competed, 14 banks including Access Bank, Citibank, Ecobank, Fidelity, Skye Bank, Stanbic-IBTC, Standard Chartered Bank and First City Monumental Bank passed the Central Bank test. Others include Diamond Bank, Guaranty Trust Bank, Sterling Bank, United Bank, First Bank and Zenith Bank. Of the list, Citibank and Standard Chartered Bank are private banks. Altogether eight banks have received government invention totaling N620 billion ($3.9 billion). CBN had earlier injected N420 billion ($2.6 billion) into the first five banks and added an additional N200 billion ($1.3 billion).

Since the first sacking, there has been a high level of curiosity about Sanusi's intentions. This was further heightened with the sacking of Oraekwotu of ETB along side Mike Adenuga Jnr., the bank's non-executive director who is also its chief promoter and the sparing of Unity Bank, a public liability company that has failed, for two successive years, to publish its audited/unaudited financial accounts. This is in addition to not been fully capitalized. Although CBN did not provide a list of Adenuga's sins, his removal set tongues wagging. Adenuga, however, was quick to state he does not owe ETB a kobo. His account, said the businessman, with the bank, which he uses exclusively in Nigeria, is in credit with deposits in very high balances. Adenuga's claims have been confirmed by the bank's new management.

Although CBN said ETB is "in grave situation" analysts say its problem may stem from its ownership structure. Sanusi told capital market operators, September 16, that he would not allow Nigerian banks to be operated as sole proprietorship but as institutions that would imbibe the tenets of good corporate governance. Despite the innuendos about illegal activities, ETB operations are faultless, a measure of good corporate governance. CBN officials say no criminal activity, such as insider lending and money laundering, was found.

And as if to disprove the "in grave situation" label, Adenuga has offered to inject $150 million into the bank, an offer CBN has reportedly endorsed. A CBN official said "Adenuga's offer is positive and since he was not found to have been involved in any criminal infraction, we decided to resolve the issue as quickly and smoothly as possible without compromising on audit." The official added that "the most plausible step to take now is to reinstate him as a non-executive director of ETB and guide the bank in resolving any observed issues."

Sanusi's actions have thrown up more questions than answers. There are claims that the next step now is to dispose of these banks. Nigerian interests, especially from north, are said to be waiting in the wings, so also are foreign interests who may want to convert the banks into Islamic banking institutions. Leading bank, United Bank for Africa, is reportedly interested in one of the banks although it has denied the claim. In faraway Istanbul, Turkey, at a conference of international bankers, Finance Minister Mansur Mukhtar, was quoted as saying that government might take over the banks by converting the N620 billion it injected to equity, effectively nationalizing them. Although government has said Mukhtar was misquoted, nationalization remains an option open to the CBN as is controlled liquidation. The CBN has said that the eight banks still have a future until proven otherwise.

Despite report that CBN and the National Deposit Insurance Corporation led the audit, it has been revealed that the both organizations carried out the task with the help of the International Monetary Fund (IMF). Sanusi said the bank gave IMF officials the financial statements of all the 24 banks without naming any of them. It was the IMF which said the first five banks - Finbank, Intercontinental Bank, Union Bank, Oceanic Bank and Afribank - were clearly distressed hence government intervention. Sanusi has said that Nigerian banks are expected to be recapitalised soon. "The Nigerian banks have brighter prospects for growth opportunities," said Sanusi. "No bank will be allowed to fail as CBN expects the banks on which regulatory actions were taken to be recapitalised as soon as possible," he added.

So far Sanusi's actions have shaken the banking sector. However, depending on which side of the divide one is, his action may be for better or for worse. However, it must be said that most analysts thought something had to be done about the morass in the banks. The banks and their CEOs have lived the life of fat cats for too long, indulging themselves and their cronies. The non-performing loans of the first five banks were in excess of N1.14 trillion ($7.6 billion) with many given to individuals without due diligence or adequate credit checks. It took the sacking of their CEOs and the intervention of the Economic and Financial Crimes Commission to know the depth of these problems. The EFCC, which went into action once the names of the debtors were made public, has so far recovered N70 billion with the debt recovery drive still on-going.

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