Bankers intensify status contest with private jets

By YEMI KOLAPO and BOSEDE OLUSOLA-OBASA

While the global financial crisis has forced bankers in Europe and the United States to tighten their belts, their Nigerian counterparts are engaged in a private jet acquisition spree. YEMI KOLAPO and BOSEDE OLUSOLA-OBASA report.


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Bankers intensify status contest with private jets





At a time when bankers in the United States of America are facing tougher rules on transparency, bonuses and the use of corporate jets among others, in response to the global financial credit crunch, chief executives of Nigerian banks appear to have intensified their contest for status with their current private jet acquisition spree.

This new craze might have been overlooked, but for the hitherto conservative nature of the banking profession. In the past, bankers and accountants were described as miserly, mainly because they rationed their spending in line with necessity.

But the banking sector consolidation, which saw banks' assets growing by approximately 277 per cent between 2003 and 2007, creating over $1bn in Tier 1 capital for about 11 banks as at end February 2008, and pushing four Nigerian banks to the top 500 in world rankings, might have made the bankers to see the need to live as big as their new shoes.

In the US, President Barack Obama does not think that the banks, which pushed the world into the current financial mess with their recklessness, have any cause to continue to live fat. He argues that it is senseless for banks to reward themselves for failure, but some experts say the Nigerian situation is clearly different from America's.

Still, others are of the opinion that the banks are groaning under some weight, which are best kept secret for safety reasons, and should, therefore, not engage in practices that will further expose them to the crisis.

However, the new craze for private jets among Nigerian chief executives comes at a time when long-standing shareholders and new investors in banks are nursing the wounds of their unexpected losses in the capital market.

But the bank chiefs do not see it this way. According to the President, Chartered Institute of Bankers of Nigeria, Mr. Erastus Akingbola, there is nothing wrong with CEOs of banks owning private jets, as long as they have not been found to have engaged in sharp practices.

He says these jets are no luxuries for bank chiefs as they facilitate their time-demanding jobs.

Explaining the usefulness of jets for the CEOs, he says, "Yes, I know some of my colleagues have jets. Once they have not been found to have stolen money; once their banks are stable; and as long as they can give returns to their shareholders, there is no problem. It is a common thing abroad.

"I don't have one yet. But let me say this, owning a jet is not a luxury. Why? I charter aircraft for the day because sometimes I want to touch three states because my diary is so full. So, if I can use that day productively by owning a jet, it is better. There was a day I was in four states in one day because I had an aircraft. I was able to achieve a lot that day and return to Lagos in the evening. So, it is not a luxury."

Some shareholders, who cannot fathom the new craze for jets acquired with monstrous sums, insist that the practice amounts to a waste of resources even though a source at the Central Bank of Nigeria maintains that the chief executives of most of the banks currently operating in the country can afford the jets without touching the bank's money.

According to the source, who asked not to be named, "Those chief executives that have bought jets have done so with their own money. They don't have any business with shareholders' funds. Do you know the amount of shares they control even in their own banks?"

But the question, according to industry watchers is: If the rich CEOs can afford to buy private jets on their own, do they also maintain the jets from their personal accounts or from the banks' accounts under the guise of travel expenses? This question is one the bank bosses will have to answer, according to a shareholder.

The CIBN identifies the tight schedules of bank CEOs as a reason why private jets may not be luxuries, but that has to be ascertained vis a vis the conditions for owning one.

In an article titled, "How to buy a personal jet" published on e-How, a foreign aviation consultant posited that a company or individual requires 350 to 400 hours of flight time per year to justify full ownership of a jet otherwise, he should consider fractional ownership or rental as a more cost-effective way of meeting the need.

But the banks are neck-deep in the passion. Investigations by our correspondents reveal that the United Bank for Africa Plc owns a Cessena Citation jet, managed by Virgin Airline; Zenith Bank Plc owns an HS 125-800 XP, managed by Arik Air; and Oceanic Bank International Plc owns two HS 125-800 jets. Guaranty Trust Bank Plc also owns a Challenger 306 jet, managed by Kings Airlines and Travels Limited while a reliable source at Bank PHB Plc also hints that the bank is on the queue, following an order it has placed for the procurement of its private jet. It is learnt that the managing director and chief executive already has the bank's approval of $20m to purchase the private jet.

"Once delivered, the jet will, among other things, enable the managing director to easily close deals across the globe," the source notes.

According to a reliable source at the Nigerian Civil Aviation Authority, who could not immediately ascertain the cost of the jets acquired by the banks, private jets, which have capacity for between four and six passengers are new acquisitions that cost a minimum of $30m.

Running costs may range between $3 to $8m per year.

Meanwhile, another source at the NCAA, who says the law does not allow an individual to run an aircraft, adds that anyone desirous of owning one must do so in agreement with an airline, which has an air operating certificate.

He, therefore, argues that it is not possible to trace the ownership of the jets to the banks or their chiefs.

However, while our banks launched a new romance with private jets, Wall Street bank, Merrill Lynch announced a sharp cut on the use of private jets among senior managing directors to reduce administration and non-payroll expenses.

A Financial Times of London report says, "The restrictions on flying by private jets are also meant to demonstrate that the firm's top brass must set an example to the rank and file in tightening belts. Other changes include requiring bankers to travel by taxi rather than limousine and reduced allowances for dinner on the job."

"Private jets can sometimes be a cost-effective means of transport for teams of bankers, enabling them to visit clients in different locations in a single day when commercial alternatives would take much longer. They now have to obtain direct clearance from the global head of investment banking to hire one and to demonstrate there is no more efficient means of transport."

Nigerian banks have also been advised to tighten their belts and reduce operating risks to pull through the current crisis unscathed, regulators may therefore need to take more than a passing look at this new bride in the industry, observers note.

http://odili.net/news/source/2009/feb/20/405.html

Nigeria is such a special country.

in these times of recession,our bank CEOs post elephant profits and ride private jets.

soon,they'll be buying refineries!!!i don't blame them sha,they just wanna have fun like our political officers who don't even work ish

LOL.

Recession ko, ODEssHI!!!!

Funny, it isnt the bank buying the jets. . they are privately owned.

And that Bank PHB, Tufiakwa!!!!!

recession my yansh.

And so If bank CEO's don't buy private jets, then who were they made for?

As long as they didn't purchase them via corrupt means, there's nothing wrong!

Nigerians just love sensational stories! As if banks are government entities!

Many of these money laundering outfits called banks will close shop by the end of the year,they are not as robust as they always make us think.

Yep, in the land of so much poverty few evil good men live in opulence.

Muza:

Many of these money laundering outfits called banks will close shop by the end of the year,they are not as robust as they always make us think.

Very prophetic words here, though Muza will undoubtedly object to being called a prophet, given the meaning of that title in Nigeria.

Ah well, at least the wankers will have a ready means of quick escape when the net starts to draw shut.

If those ''puny'' banks with their cooked books are buying jets, maybe the likes of Barclays and HSBC should be buying spacecrafts.

If those ''puny'' banks with their cooked books are buying jets, maybe the likes of Barclays and HSBC should be buying spacecrafts.

Roflmao

Many of these money laundering outfits called banks will close shop by the end of the year,they are not as robust as they always make us think.

They are just trying to rub shoulders with successful pastors but what they don't know is the pastors economy is direct from God and not dependent of the current economic situation of the world.

Praise the Lord, and may our arms grow long enough to reach down and grasp the contents of God's collection basket.   Amen

I hope the regulators aren't sleeping cos we no wan hear tori when wall street virus go reach our shores o!

Plz where is the hanger for the UBA jet? Just incase we need to hold on to it, if the need arises.

duabba:

I hope the regulators aren't sleeping cos we no wan hear tori when wall street virus go reach our shores o!

Plz where is the hanger for the UBA jet? Just incase we need to hold on to it, if the need arises.

lol

Plz where is the hanger for the UBA jet? Just incase we need to hold on to it, if the need arises.

can you fly a jet or will you tow it with Molue?