“Penultimate Friday, both banking icons were among chief executive officers and executive directors of five banks made to step down from office, on the orders of the Central Bank of Nigeria. My heart truly goes out to them, and I have joined many others in praying for them. As I perused the facts and figures that have been placed in the public domain, reactions from several quarters and the usual interplay of factors and interests in policy formulation and execution, a number of questions beg for answers. But I’ll come back to this later. It suffices to emphasise that these CEOs and their executive boards have, as I write this, not been accused of any criminal activities. The issues are those of risk management, which is basically one of judgement and its resultant effect on the strength of their operations; they are issues of corporate governance.”
Last year, the men’s ministry that I have the privilege of coordinating planned what we called a Mighty Man of Valour Dinner. It was intended to be the climax of a relatively active year in our outreach programme. We wanted someone to speak on the topic, “Navigating the Babylonian System with Kingdom Tools” which was what, in retrospect, had turned out to be our focus for that year. We wanted a man who was incontrovertibly Christian in the way he operated the business he is in. We found that man in Dr Erastus Akingbola, Group Managing Director, Intercontinental Bank Plc. We therefore prefixed the theme, “Banking on God.” Unfortunately, the event did not hold for various reasons, including unavailability of the guest speaker.
In a different capacity, we tried to reach out to Chief Mrs Cecilia Ibru, Managing Director/Chief Executive, Oceanic Bank Plc to speak at a Luncheon on “The Place of Christian Ethics in Corporate Governance”. Again, the event did not fly – for several reasons – also, not excluding the proposed speaker’s minders’ inability to even respond to our letter.
I have recalled these to demonstrate the very high esteem in which this writer holds these two bankers who exemplify, in their public activities, a commitment to the faith they profess. For me, they are people who made their name, fame and resources available for the propagation of the gospel and therefore role models who should have things to impart to others. Although, one was disappointed that their inability to accept those invitations contributed to the indefinite postponement of both events, the high esteem in which I held them did not and has not diminished.
Penultimate Friday, both banking icons were among chief executive officers and executive directors of five banks made to step down from office, on the orders of the Central Bank of Nigeria. My heart truly goes out to them, and I have joined many others in praying for them. As I perused the facts and figures that have been placed in the public domain, reactions from several quarters and the usual interplay of factors and interests in policy formulation and execution, a number of questions beg for answers. But I’ll come back to this later.
It is important to emphasise that these CEOs and their executive boards have, as I write this, not been accused of any criminal activities. The issues are those of risk management, which is basically one of judgement and its resultant effect on the strength of their operations; they are issues of corporate governance.
This should bring to memory the controversy that followed a report by a Paris, France-based journal, The Africa Report, published a few months ago. In that cover story headlined, “Nigerian Banks, Signs of Life” authored by Nicholas Norbrook and LeoNard Lawal, only four of Nigeria’s 24 banks were adjudged to be as “Strong” and “Thriving”. None of the five banks whose top management went under Central Bank Governor Lamido Sanusi’s hammer made that list. Nine others were rated as “Satisfactory”. These are banks the journal said were likely to “survive” in spite of “some margin lending issues”. Of the five only Afribank made this segment. The other four were named among those having “serious governance issues (that) need urgent attention” and grouped alongside three others as “Shaken.” A fourth group was labelled “Stressed” and described as “on the ropes, will either sink or be swallowed”
Interestingly, the magazine was vilified by some organs of government, the banks and a section of the media. It was even accused of doing a hatchet job for some foreign investors looking to invest in the Nigerian financial sector, on the cheap. Yet, a reading of the very brief report would have shown that no matter the motives, the facts were empirical and not in anyway different from those that have been published and commented upon by some of the more perceptive ones among Nigerian financial journalists. For instance, the report spoke about the Nigerian Stock Exchange’s loss of “over 65% of its value since March 2008” and how “an estimated N8trn ($54bn) has been wiped off bank stocks, which represent two-thirds of total market capitalisation.” It also reported that “the CBN believes that the sector could face up to N1trn of bad loans and has talked of setting up an asset management company onto which banks can offload their toxic assets.” It quoted a financial analyst, Latyr Diop of Afrinvest West Africa as saying that “Most of the banks have over-leveraged their balance sheets during the boom cycle and are stuck with trillions of naira worth of bad debts…” In situating the crisis, the report said: “…Lending was particularly strong to government and the oil and telecom sectors. Though telecoms seem to be holding up, the other two pose greater problems. The fall in the price of oil has put several energy related companies out of business, with repercussions for those banking them”. None of these ranks as revelations, save that key stakeholders were either living in denial, or were wary of rocking the financial system boat.
So vociferous were the attacks on the magazine that it had to respond. In a statement standing by their story, the management headed by a veteran, highly connected reporter on Africa and African issues, Patrick Smith wrote in part: “Our ranking of the banks was based on qualitative not quantitative factors. Nigerian banks are used to being graded on numerical performance indicators, a grading process that is in itself open to manipulation…Qur report was about transparency, corporate governance, accounting practice, lack of disclosure and up-to-date financial reporting, Banks & Other Financial Institutions Act infractions, auditor commentary and accessibility.”
What the journal said in May 2009, for which they were called names, was exactly what CBN’s Sanusi repeated both in his address to the media two Fridays ago and in his exclusive interview with ThisDay thereafter. Among other things, he was quoted as saying that he ordered a special examination of the five banks because he was alarmed: “at the quantum of exposure which some of the banks had…An exposure to a capital market that has lost over 70 percent of its value was a long term problem unless people believe that the capital market will pick up in the next few months and I do not think that stocks are going to go back to that very high level within a short time.”
From these, it is clear that what the CBN had to deal with was not crime, at least, not yet. What we have here is a case of poor judgement, which might have its roots in any number of other soils. As Sanusi told ThisDay Board of Editors: “…In every capitalist environment, if management loses a lot of money, it will go. It is not a crime. The MDs of all the banks behind the mortgage crisis in other parts of the world took the right action and resigned. They did not steal money. They did not commit a crime. But they ran an institution in a manner that cost it its franchise, or cost its shareholders money or placed their depositors at risk. They put their firms at risk and they took responsibility for it. So, it is in this light that the action that we have taken should be seen. “
Now, of the questions that have arisen from the on-going situation, I consider the most important as how did these banks get into the mess that the facts and figures suggest they are in? As I said earlier the risk management issues that have come to the fore would have their roots in a variety of soils. These might include inadequate expertise at risk evaluation, lack of depth in their management cadre; support for government policies or, greed for gain leading to the rush to the gravy trains that the capital market and oil and gas were up to 2007. Of course there are questions also of whether sacking of the executive boards of the banks was the only effective solution? Was appropriate care taken in determining the extent of bad loans? Could an organ of government like CBN have helped with recovery of policy-support loans where government is the ultimate debtor? Most germane of all, in relation to this column is the implication of these developments for the place of faith in decision making as corporate helmsmen – for those who profess their faith.
We’ll examine these questions in the concluding part next week. By the way, has anyone sent The Africa Report an apology, yet?
PIXES: EMBATTLED BANK CHIEFS...
Dr Erastus Akingbola, Intercontinental Bank PLC &
Dr Mrs Cecilia Ibru, Oceanic Bank PLC
No comments:
Post a Comment