REPOSITIONING AND
SANITISING THE NIGERIAN BANKING ENVIRONMENT
By Yinka Otoki
Nigeria’s financial sector has witnessed a series of reforms
since the country returned to democratic rule in 1999.
The Central of Bank of Nigeria, CBN, instituted a series of
guidelines on corporate governance for licensed banks in the
country to entrench a new culture of integrity.
Consequently, in 2004, the CBN introduced a Banking Sector
Reform designed to put the country’s banks on a much stronger
footing through a process of de-fragmentation or consolidation
of the sector by the merger of smaller banks.
By the deadline of the consolidation exercise in December 2005,
only twenty-five out of eighty-nine banks in the country were
able to meet the twenty-five billion Naira recapitalization
condition.
Upon assumption of office as the CBN governor in June this year,
Mr. Sanusi Lamido Sanusi made it clear that he was going to
pursue corporate governance in the nation’s financial sector.
In August this year, the CBN embarked upon another major reform.
From the investigation it carried out, it found out that ten
banks were unhealthy. To save the banks from collapse, the CBN
bailed the ailing banks with six hundred and twenty billion
naira, sacked their management teams, and appointed new CEOs to
run the banks for the time being. The lifeline given to the
banks are to be refunded to the CBN within a limited time frame.
The CBN accused the sacked banks’ chief executives of
fraudulently awarding unsecured loans to cronies and their
companies. It indicted the banks for being exposed to toxic
assets and for relying on discount window borrowing to remain
afloat.
The apex bank consequently published the names of individuals
and organizations that were indebted to the troubled banks and
sent the country’s anti-graft agency, the Economic and Financial
Crimes Commission (EFCC), after them to recover non-performing
loans.
Over 10 executives of the affected banks and 30 debtors are
being prosecuted by EFCC. The list is still on the increase.
The CBN is working assiduously to ensure that no bank goes
under. It has now made it compulsory for all banks to give full
disclosure of their financial activities in order to restore
confidence to the sector. In addition, it promised to continue
to look into their books to ascertain their state of health. The
apex bank has also appointed advisers who will work with the ten
affected deposit money banks.
The banks are Afribank Plc, Finbank Plc, Intercontinental Bank
Plc, Oceanic International Bank Plc, and Union Bank of Nigeria
Plc.
Others are Bank PHB Plc Equatorial Trust Bank Limited, Spring
Bank Plc, Wema Bank Plc and Unity Bank Plc.
The advisers are expected to work with the boards and management
of the ten troubled banks by exploring all options for securing
their stability and long-term future growth. In addition, they
are to explore all possibilities for institutionalizing best
practice and good corporate governance at each of the banks.
In a bid to entrench a banking system that commands the respect
and confidence of the banking public, the CBN is also taking
steps to ensure that the proposed Asset Management Company comes
on stream in not too distant future.
All of CBN’s efforts have so far received the backing of the
country’s President, Alhaji Umaru Musa Yar’Adua and the
parliament.
It is gratifying to note that sanity is fast returning to
Nigeria’s banking sector and restoration of best banking
practices seems inevitable.
