CBN-Induced Banking Crisis- A Solution – by Bayo Adeyinka


At the risk of sounding like a broken record, I wish to reiterate that this current crisis which is totally uncalled for was induced by SLS, the CBN Governor. Events are now turning out to show his actions were not well thought out. You don't solve a problem by creating a bigger problem!

Now, a bigger mess has been created which will take nothing less than 4 years to clean up (quote me). A great crisis of confidence has been generated both in Nigeria and outside. Aside the flight to safety (where customers withdraw their deposits from banks that are perceived to be weak and take them to seemingly stronger banks) in Nigeria , Nigerian banks in other African countries have witnessed panic withdrawals or unusually desperate enquiries on their health. It is a boomerang effect. The gains of the past 5 years have been eroded with a single hare-brained statement!

Having realised his gross school-boy errors, SLS has now embarked on a clean-up assignment to foreign countries, trying to clean up the mess. Foreign banks have withdrawn credit lines. Letters of credits that have been opened by importers and guaranteed by foreign correspondent banks are at risk. Banks have been witnessing recall of transferred funds. Simply put, an import-dependent economy like Nigeria is in deep trouble. Credibility of Nigerian banks have been impaired. The issue is now beyond 5 so-called banks. ALL BANKS ARE NOW AT RISK.

What is basically a civil matter and could be resolved within the ambit of sense and the law courts have been turned into a show-boating event by the EFCC, which has suddenly woken up from stupor. I pray no cheque is written in the name of THE FEDERAL GOVT like Madam Waziri said because it will simply be re-looted by the recovered Abacha loot. Pray, an EFCC that couldn't do anything to Ibori and Kalu had to relocate to Lagos with 100 operatives. Is the EFCC a debt recovery agency? I wonder why a total expose was not done including publishing government agencies and parastatals who are owing!!! You can be sure the public sector is a greater culprit!

It beats me why the Board of these banks couldn't have been called succintly and shown the audit results (if any) and encouraged to show the CEOs the door through board removals that will seem like an action carried out in a normal course of business! Was Soludo not aware there were issues? Yes he was. That was why he made room for the Expanded Window for them to borrow to get into shape again. He knew the nation could not afford any imposion! To me, that is a more matured way of handling what could turn out to be an economic suicide. What is more apalling is that there will be loss of jobs... or what else do you expect to happen to banks that are unable to sustain their business? They will want to cut down on costs to remain afloat and the very first consideration will be to prune number of staff. So much for Sanusinomics!

What are the immediate solutions to this perennial banking crisis?

1. The 5 banks' shareholders should immediately sue the CBN for an illegal take-over of their banks. The N100b each shared to those banks does not empower the CBN to appoint CEOs for the banks. I am happy Ibru and Akingbola have already challenged this action in court.

2. The office of the CBN Governor must be split into two. The CBN Governor, as the office is, is too powerful. In most developed countries (e.g. UK and the US ), the HM Treasury and the FSA (Financial Services Authority) are different bodies. The Reserve Bank regulates the monetary policies for the government while the FSA regulates the banks and other financial institutions including mortgage banks and insurance companies. The Central Bank should only be concerned with stuffs like inflation, interest rates and control of money in circulation. Full stop. The Other body should be concerned with regulating banks and the body will comprise of selected people from the financial sector, academia, etc. That is what can guarantee independence and ensure there are no conflicts of interest. I know it is the National Assembly that can change the CBN Act and we have a long way to go with those snoring senators and bumbling representatives.

3. There must be an imbibing of corporate governance in our institutions. Internal auditors must be empowered to blow the whistle when unethical practices are seen or perceived. They must have a reporting line to the Board and not the MD or their managers.

Bayo Adeyinka

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