http://renaissanceprofessionals.com/2010/07/19/sanusi-versus-the-nigerian-economy-how-to-destroy-a-banking-system/

Nigerian Banking System still highly risky – Rating Agency, The Punch, lead story, Tuesday, June 29, 2010

“Nigerian banks are extremely risky, despite the N620bn bailout of the sector in 2009, a global rating agency, Standard & Poor, has said. The ratings we have for the banks are in the single ‘B’ category, it’s a very low level compared to most banks in the world… In regulatory reform, there is still a long way to go.”

But what do you hear from our know-it-all CBN Governor?

In interviews with national papers, Sanusi claims to have restored macroeconomic stability, crashed the interbank rate, brought down inflation rate, stabilized the naira, and killed the black market.

But fellow compatriots ponder over these posers.

Macroeconomic stability: Can we really say the CBN has achieved macroeconomic stability in the one year of Sanusi? How many investors are confident about the long term direction of the Nigerian economy under Sanusi? Why has the demand and supply of credit collapsed? If companies are so confident about the future why has the little employment in the system collapsed? Why is there massive capital flight as represented by the high demand for forex on a weekly basis? Why is there massive preference for low-yielding government securities at the expense of private sector lending? Why is there a massive build up of Cash Mountains at the CBN at heavy cost to the Nigerian banking industry? The truth: the CBN is far from achieving macroeconomic stability. Sanusi has created macroeconomic instability by his reforms and he has no idea how to stabilize the economy.

Interbank rates: Agreed, Sanusi has crashed interbank rates but that is because he has guaranteed interbank lending. Banks are lending to each other not because confidence has been restored into the system but because the CBN has guaranteed that it will make good any loss incurred in the process. So, interbank rates have fallen from an extreme high averaging 22 percent to an extreme low averaging 1.25%. At the extreme high, banks were making profits with high risk; at the extreme low, banks are making losses with no risk. Either extreme will kill a bank. At the high extreme end you have instant death when the risk crystallizes, at the low end, its death by slow poison. The question that should be asked is: why is confidence eluding the banking system even after the CBN claims to have isolated the banks heating up the system, pumped in N620 billion into these banks, installed its own managers and yet banks would not lend to each other without the CBN guarantee?

The pursuit of an agenda

A few months before Sanusi emerged governor, Meryll Lynch conducted an independent report on the Nigerian banking industry and estimated that the amount of non performing facilities or toxic assets in the Nigerian banking system stood at N9 trillion.

The taken over banks in the financial system had total non performing facilities of N1.5 trillion. Where is the balance of N7.5 trillion toxic assets hidden in the financial system? Is it any wonder that the CBN has had to retain its guarantees for interbank lending to enable banks lend to each even after claiming to have restored confidence in the banking system? Is it any wonder that all the banks that were cleared are now in several courts to recover loans that the CBN once declared as performing? Is it any wonder that these same banks are desperately seeking fresh capital in excess of N5 trillion from shareholders?

Anyone familiar with the stress testing that Sanusi carried out on the banking industry before he hijacked eight of them would find out that it was anything but transparent. The criteria for auditing the banks were only known to Sanusi. The basis for classifying a facility as bad was not made known. His definition of what corporate governance is and is not was laughable (Unity Bank, which did not have an audited account for three years passed on Corporate Governance). Sanusi knew the banks he wanted out of the system and that was the only criterion that mattered.

Biased auditing of banks

Since July last year (2009), the Nigerian banking system has been subjected to two different standards of auditing. One standard of auditing has been reserved for the banks taken over by the CBN whose books have been subjected to all forms of continuous investigative auditing for a year running while the non-taken over banks have been subjected to the normal auditing standards of the industry pre Sanusi. The obvious aim of these two different standards of auditing are;

1. Justify Sanusi’s action against the eight banks which the CBN currently manages

2. Paint the former management of these banks in the worst possible light

3. Create a platform for the cronies which the CBN has installed in these banks to look like great managers when all the unnecessary provisions that have been forced on these banks are reversed in 2010 financial year.

4. Justify his continuous and erroneous assertion that shareholders have lost their stakes in these banks

Sanusi’s future apocalypse for Nigerian banks

Sanusi in his first anniversary interviews claim he is going to make it easier for the CBN to take over banks in future without the approval of shareholders, sell or merge banks without the approval of shareholders. Add to these, the fact that already the CBN is set to ensure that directors of banks can be removed every two years at its discretion and that MD/CEOs cannot stay more than five years without its approval, no matter what shareholders think and you get the picture of a banking industry that will be hard pressed to raise equity capital in future. These decisions have been taken by Sanusi without any consideration that Nigeria is in a global village and that introducing policies that undermine Nigerian banks’ ability to raise future capital will undermine their ability to compete globally. In one year, Sanusi’s policies have done just that. He has not only destroyed the financial standing of Nigerian entrepreneurs globally but by his statements and actions damaged their integrity and standing in the international community.

Sanusi’s courage in one year has been geared towards the destruction of businesses, corporate and personal reputations and undermining the Nigerian economy.

^^^
Simply mind boggling