Another banking crisis coming up – 1
On April 30, 2012 · In Sobowale On Business 12:40 amEmail0

By Dele Sobowale

“History does repeat itself; man does”. Barbara Tuchman, the world’s leading historian on 13th Century Europe.

This would be the third alert I would issue in the last fifteen years about a banking crisis about to occur. Almost invariably, the banking crisis causes collateral damage in the capital market – which heads down as a result. The recent appointment of market makers by the Nigerian Stock Exchange, NSE, might represent taking on fresh fuel before a ship capsizes. It will not help; it might even add to the problems that would result from the carnage.

Before you dismiss this as another fantasy, let me remind you that in 1997, in an article published here in VANGUARD titled “FUNNY MONEY”, I predicted that the banks announcing heart-thumping financial results were publishing falsified results based on shady deals and “creative accounting” – meaning they were forging the figures.

Drawing up a list of 19 banks which I predicted would go down, with Commerce Bank at the top, the Editor of VANGUARD published the article without the names of the banks. He was particularly skeptical about the prediction that Commerce Bank, whose top two officials (names withheld) were both former Presidents of the Nigerian Institute of Bankers, could not be running a bank heading for the graveyard. Well, all the 19 banks fell; Commerce Bank fell hardest. As Mohammed Ali, the Greatest boxer ever, once told us, “the bigger they are, the harder they fall.”

That crisis resulted in the Failed Banks Decree promulgated by General Sani Abacha – designed to teach Nigerian bankers a permanent lesson. Abacha was wrong on that score; as he was on most things. The Nigerian banking sector is not a standing army – which can be taught enduring lessons.

It is more like a moving parade in which each new troop, like zombies, fall into the same traps like the previous ones. Every new generation of bankers simply refuses to learn from the old. Otherwise, they learn the same tricks, add new twists, and head for their own abattoirs – with their depositors in tow – to be slaughtered.

When Professor Chukwumah Soludo introduced “con-soludo-tion” as a panacea to all our banking woes; he was first advised to slow down. But, like every man with a vision, he refused to listen to caution. He probably never read that observation by British Prime Minister John Major. “People with vision…(VANGUARD BOOK OF QUOTATIONS p ).


CBN Governor, Sanusi Lamido Sanusi

So again, like lemmings, Nigerians were marched to the edge of the financial precipice and made to jump. Another banking crisis was upon us. As usual, I was busy warning “My Fellow Nigerians”, in 2007 and early 2008, that the banks, into which Soludo said we could put our money and “go to sleep with two eyes closed”, were about to close our two eyes permanently.

Again, as usual, few listened to the warnings –until Intercontinental, Oceanic, UBA, First Bank etc shares that were selling above N30 per share in March 2008 went begging for under N3 per share. We are still not out of the woods. In fact, we might be heading back to the jungle.

Unfortunately, the man who blew the whistle on the banks – the current Governor of the Central Bank – had himself gone to sleep while the banks resorted to the same old tricks which got us into trouble the last time around. Like Soludo before him, Sanusi had just been awarded the Banker of the Year prize.

Again, like Soludo, the CBN chief might be receiving the award just before another banking crisis engulfs the nation. For, make no mistake about it; another banking crisis is looming; and it might be more devastating than anyone before it.

So in effect, this article is not meant for the CBN and bankers; it is addressed to Nigerians who still have any money left in those banks on their way to the cemetery. Out of sense of social responsibility, no banks would be named here – in order to prevent a run on those banks which could only make things worse – for the banks, for the depositors and for Nigeria.

A good deal of the blame goes to the CBN Governor. He might have set an all-time world record for a nation’s chief banker in the number of non-banking controversies in which he got himself embroiled. Back in my days at the Nigerian Institute of Management, Victoria Island, I taught a course titled “TIME AND SELF MANAGEMENT” designed to train executives, in the private and public sectors, to spend their time more productively.

I still have some clients who request for the lecture every two or three years. To me, the first lesson to learn, for any manager, is the fact that THERE ARE ONLY TWENTY-FOUR HOURS IN A DAY. The President and the pauper have the same allotment of hours in a day. The most effective managers start by allocating as much, if not all, their time to their core functions.

Perhaps, sometime, after Sanusi had left CBN, he would reflect on whether some of the time he spent on distractions would not have been better utilized examining the books of the banks he was appointed to supervise – now that another crisis looms on the horizon.

He should also be worrying about the CBN’s involvement in the fuel subsidy scandals; while he cannot ignore the role of banks and CBN bank examiners in the unfolding drama of mild-boggling pension funds frauds. Anyone who thinks only N2 billion cash is locked in wardrobes must live in another country – not Nigeria. On account of fraud and increasing lack of confidence in banks, more money are in holes and under beds than ever before.

To be sure, the CBN had declared that it is ready to sanction any bank found to have violated banking rules and regulations with regard to the diversion of pension funds to multiple private accounts. But, the sheer number of illegal accounts opened, and the flagrant violation of the “Know Your Customer” principle point to hundreds of billions of naira in possible fines for banks just crawling their ways out of financial holes.

Zillions of questions will eventually be asked; and billions, if not trillions, will be involved, some of it unlikely to be recovered, and another round of bank cleansing will take place against the background of the alleged N9 billion questionable write-off by a Chief Executive brought in to revive the bank in the first place.

If the deal is found to be fraudulent, the CBN Governor must share the greatest portion of the blame because it would be recalled that the appointment of the particular Managing Director was greeted with a storm of protest – which Sanusi ignored. The debtor’s refusal to honour investigators’ invitation is not helping matters either. Only a total exoneration of the former CEO can save the CBN Governor from embarrassment.

While the looming crisis is predictable, it is not clear which options are available to the nation. Each generation of bankers seems adamant to repeat the sharp practices of their predecessors; each time leaving their banks in more desperate straits than before and virtually compelling incumbent managers to cut corners in a bid to obtain good results in a short time. We might be involved in a Catch-22 scenario.

Finally, readers and policy makers will ignore this warning at our corrective perils. The future of easy crude oil money is increasingly in doubt; without a vibrant banking sector, we run the risk of never reaching the top twenty – whether in 2020 or any other time.

This is one time when being right offers no consolation.

http://www.vanguardngr.com/2012/04/another-banking-crisis-coming-up-1/

Vanguard should go and sit down jare, they have always had it in for Sanusi from day one, he stopped them from making money off their bogus awards, if Sanusi sanctions banks, there is wahala, if he fails to do so, there is wahala, money does not have legs, it can be traced if the FG is serious about tackling corruption, one of the ways of tracing money is with this cashless policy, yet, people are kicking against it.