For every Vanguard, there is a more informed BusinessDay! BusinessDay, a business and financial daily, which has no other business than analysing and reporting the economy says this: http://businessdayonline.com/index.php?option=com_content&view=article&id=4671:who-saw-the-bank-crisis-coming&catid=123:special-report&Itemid=361Home Special Report Special Report Who saw the bank crisis coming?
Who saw the bank crisis coming?
Monday, 24 August 2009 01:24 MAX AMUCHIE
In a much celebrated article entitled: ‘The Agenda-Setting Role of the Mass Media in the Shaping of Public Opinion’, Maxwell McCombs, a professor at the University of Texas, Austin, United States notes: “The power of the news media to set a nation’s agenda, to focus public attention on a few key public issues, is an immense and well-documented influence. Not only do people acquire factual information about public affairs from the news media, readers and viewers also learn how much importance to attach to a topic on the basis of the emphasis placed on it in the news. Newspapers provide a host of cues about the salience of the topics in the daily news – lead story on page one, other front page display, large headlines, etc. Television news also offers numerous cues about salience – the opening story on the newscast, length of time devoted to the story, etc. These cues repeated day after day effectively communicate the importance of each topic. In other words, the news media can set the agenda for the public’s attention to that small group of issues around which public opinion forms.”
The principal outlines of this influence had been sketched as far back as 1922 by Walter Lippmann in his work, ‘Public Opinion’. According to Lippmann, the news media are a primary source of pictures in our heads about the larger world of public affairs, a world that for most citizens is “out of reach, out of sight, out of mind.”
One can therefore appreciate the critical role of the media as the fourth estate of the realm, a tag that has stuck since Edmund Burke, the 19th century British parliamentarian and political philosopher assigned the fourth position to the media in a realm that comprises the executive, the legislature and the judiciary in that order. What we know about the world is largely based on what the media decide to tell us. More specifically, the result of this mediated view of the world is that the priorities of the media strongly influence the priorities of the public. Elements prominent on the media agenda become prominent in the public mind. If the media fail, the society is doomed. In BusinessDay this is taken seriously.
The agenda of a media house is found in its pattern of coverage of public issues over some period of time, a week, a month, an entire year. Over this period of time, whatever it might be, a few issues are emphasised, some receive light coverage, and many are seldom or never mentioned. It should, however, be noted that the use of the term ‘agenda’ here is purely descriptive. There is no pejorative implication that a media house like BusinessDay ‘has an agenda’ that it relentlessly pursues as a premeditated goal. The media agenda presented to the public results from countless day-to-day decisions by BusinessDay journalists and board of editors about the issues of the moment.
The beginning of this year presented a clear picture of the shape of things to come and BusinessDay seized it and foresaw the sequence of events that culminated in the sack of five chief executive officers of Nigerian banks on Friday, August 14. For five days, February 16 to 20, BusinessDay ran a series on the Nigerian banking sector. It was a time that there was anxiety and excitement over the reappointment or otherwise of the former governor of the Central Bank of Nigeria, Chukwuma Soludo. The professor of economics was appointed in 2004 and his coming led to consolidation in the Nigerian banking industry, an exercise that saw banks move their capital base from a paltry N2 billion to a minimum of N25 billion.
Initially, the move was criticised, but when at the end of 18 months period 25 banks scaled the huddle, consolidation was hailed as the best thing that had happened to the Nigerian banking industry.
[b]However, for keen observers and for BusinessDay board of editors, there were challenges and miscues that needed to be addressed, questions that needed urgent answers and measures that needed to be taken to steer the Nigerian banking sector away from a path of destruction.[/b]It has become public knowledge since the landmark decision of the sack of the five CEOs on August 14 that the huge debts totaling more than one trillion naira that crippled the five banks had to do with loans related to the capital market and the oil and gas sector.
The present governor of the CBN, Sanusi Lamido Sanusi, while announcing the decision to sack the five managing directors, attributed the crisis in the banking sector to a failure of regulation over time. Long before then, BusinessDay had recognised the nexus between the margin loan crisis and weak regulation.
The paper’s lead story on Tuesday, February 17, 2009, was entitled: ‘How regulatory failure created margin loan crisis’. BusinessDay wrote: “A failure of regulatory oversight by the monetary authorities, charged with the responsibility to monitor and supervise how banks lend and disburse loans in the financial system, has been identified for the massive margin loan crisis hanging over the banking industry.
“The banking regulator, the Central Bank of Nigeria (CBN) is believed to have taken its eye off the ball while a number of banks moved recklessly into the capital market to perpetrate unwholesome practices designed and calculated to shore up the value of their shares in the capital market.”
We further went to report that the CBN only moved to play its oversight role after the crisis had deepened, and even when it did, its measures were targeted at general monetary concerns.
The next day, BusinessDay’s lead story was ‘Outrage as CBN lends to some banks at 11 percent’. The story reads: “The Central Bank’s expanded discount window through which it acts as lender of the last resort to the nation’s banks was opened a bit wider some months ago but access was initially fixed at an outrageously low eleven percent per annum.
“Almost a trillion naira was extended to the banks since September when access through the window was eased but some bankers thought it was unwise and indeed curious that the Central Bank will extend credit to banks at eleven percent interest rate at a time when deposits could command as much as 16 or even 17 percent.“Expectedly a deluge of requests came in from the banks, some simply because they could not just sit there watching their competitors profit from a seemingly unusual handout from the lender of last resort.”
The story quoted a banker who said: “All over the world, when you reach out to the lender of last resort, what you get is at a premium. But here banks were to all intents and purposes being rewarded instead of being punished.”
On page 53 of the same edition, we ran a story entitled, ‘With blurred supervision, banks are back to cooking the books’. In the story, BusinessDay writes, “Declarations of bogus profits and failure to disclose toxic assets have crept into Nigeria’s banking system. And analysts, worried by the trend, say banking in the country has gone back to the old days when banks kept more than one statement of account for different purposes.
“But the understanding of many was that the Central Bank of Nigeria would be up to the task of supervising and discouraging banks from cutting corners. Information reaching BusinessDay indicates that the apex bank may have been looking the other way while banks cheated their shareholders of billions of naira.”
On Thursday, February 19, 2009, BusinessDay came out with a lead headline ‘CBN’s lax supervision set stage for irregular financial reporting’. According to the report, CBN’s laxity in effectively monitoring financial reporting by banks had put it at daggers drawn with Nigerian Accounting Standards Board (NASB) charged with the task of ensuring compliance with set standards of financial reporting in Nigeria which is in line with international accounting standards.
For instance, according to the story, analysts expressed surprise over lack of details by the banks which supply only basic information as profits, earnings, shareholders’ funds at the exclusion of important details such as unsecured consumer credits, trade finance exposure, equity markets risk, corporate lending risk, sovereign fixed income as well as significant potential for foreign currency risk as point of large scale asset and liability transactions with international counterparts.
And on Friday, February 20, 2009, the last day of the series, which was three months ahead of the end of the tenure of Soludo as CBN governor, BusinessDay predicted that he would not be reappointed and took the public through reasons he was unlikely to get a second term in office.
Quoting an advisory by Eurasia, the leading political risk research and consulting firm based in New York, the United States, BusinessDay catalogued a number of CBN’s policy somersaults, condescending statements talking up the economy and flip-flops which together with other issues have helped to dent Soludo’s chances of re-appointment. The report reads: “Soludo’s current five-year tenure ends in May. While Soludo gained widespread international respect for his leadership in pushing banking sector reforms and a massive consolidation of the Nigerian banking system under the Obasanjo administration, his recent miscues on the direction of inflation and currency policy have left his much vaunted credibility damaged. Whoever replaces Soludo from Yar’Adua’s inner circle is likely to be more strongly market interventionist than Soludo, who had until recently been fairly neo-liberal in his policies.” Since Sanusi sacked Erastus Akingbola of Intercontinental Bank, Cecilia Ibru of Oceanic Bank, Okey Nwosu of FinBank, Barth Ebong of Union Bank and Sebastian Adigwe of Afribank, it has become public knowledge that they were the main beneficiaries of the controversial expanded discount window, had cooked books to hoodwink the public and their shareholders and exposure to margin loans. BusinessDay foresaw the present crisis and faithfully discharged its responsibility to the public, but nobody, not even the authorities paid attention. |
