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Nigerian Banks were Gambling Centres, hence reforms - Sanusi
Category: Nigerian Economy
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Key Highlights:
1. Nigerian banks are gambling centres
2. The Nigerian stock market as a casino
3. Public office holders are accomplices in the shady deals in which depositors of banks and investors in the stock market were being manipulated.
4. Price manipulation is rife in the Nigerian Stock market
5. Warns depositors not to entrust their money to banks operating more like gamblers
6. Banks do create a false impression about their well-being in order to manipulate unsuspecting depositors
7. Advocates for a Bank Use Act, to overcome what he described as “Insurance Business and Fixed Income Bubble
Saturday, 10 Jul 2010 - The event had been promoted on April 28, 2010 (http://www.proshareng.com/news/singleNews.php?id=10375) as a forum for highlighting the ‘gains’ of the reform. The Governor of the Central Bank of Nigeria, Mr. Sanusi Lamido Sanusi, on Friday, July 9, 2010 in Asaba, lived up to the billing when he described most Nigerian banks as gambling centres.
Sanusi also described the Nigerian stock market as a casino, where fraudulent business transactions are perpetuated to the detriment of the citizenry.
He said politicians, particularly public office holders, were accomplices in the shady deals in which depositors of banks and investors in the stock market were being manipulated.
He tongue-lashed politicians for being responsible for the failure of some banks in the country.
The CBN governor stated these in a lecture titled, “The Economy In Perspective: Consolidating The Gains of The Banking Sector Reforms,” which he delivered in Asaba, Delta State capital. The lecture was organised by a non-government organisation, The Knowledge Centre, based in Onitsha-Ugbo, Aniocha North Local Government Area of the state.
Sanusi said that members of the management and board of the banks easily gambled with depositors’ money and colluded with the operators of the stock market for selfish motives.
He said the investors in the stock market had been turned to casino players by those who freely manipulated the market, warning depositors not to entrust their money to banks operated by those he referred to as ”gamblers.”
The CBN boss, at the event chaired by a former Head of the Interim National Government, Chief Ernest Shonekan, and attended by the Delta State Governor, Dr. Emmanuel Uduaghan; his Anambra State counterpart, Mr. Peter Obi; Managing Director of BGL Plc, Mr. Albert Okumagba; and President of Afreximbank, Cairo, Egypt, Mr. Jean Louis Ekra, reiterated that CBN embarked on the ongoing banking reforms to save depositors and investors from being fragmented by the failed banks.
He accused the boards and managements of the banks of creating a false impression about their well-being in order to manipulate unsuspecting depositors, warning that the CBN was poised to put an end to the ugly trend.
He said, “Although financial crisis is an integral part of every capitalist system, banks should stop preventing depositors and investors from Technical and Fundamental Analysis and Investors’ Sophistication.
“We had a banking system in the past that was exposed to the capital market but without guidelines and regulatory system on lending margin. In the stock market, what people think about is how it will go up. But this market, this casino, is what those entrusted with depositors’ money gamble with.
“A stock market is a very funny casino. Don‘t entrust your money with gamblers. CBN rules and regulations around the banks cannot be compromised. We are not just doing the sanctioning, we are combing the banks for excellence. The banks must stop creating the impression that they have values when in the actual sense they are dying.”
To salvage the situation, Sanusi advocated for a Bank Use Act, to overcome what he described as “Insurance Business and Fixed Income Bubble,” adding that the current and saving accounts of depositors would no longer be allowed for use in executing private businesses.
“The CBN will no longer allow the use of current and saving accounts of depositors by banks to service insurance businesses, construction of roads and bridges by governors, senators and other political office holders, and the days of Intercontinental Bank‘s 30 per cent ownership by an individual, Oceanic Bank‘s 40 per cent ownership by a family and Afribank‘s 12 per cent by an individual, aside all other bad loans, are gone.”
Source: Punch
Recall:
Sanusi: Four foreign banks bid for Nigerian banks
Written by Idris Ahmed (Daily Trust) with agency report
London, Friday, 02 July 2010 – The Central Bank Governor, Sanusi Lamido Sanusi said that four foreign banks have expressed interest in Nigeria’s troubled banks. He did not name the banks. He spoke to reporters in London.
“We expect (the bids) by the end of July from local banks, foreign banks and private equity firms,” Sanusi said.
“The bulk of them are local, there are four international banks.” He said the results of the bids would be released by September or October.
But the head of the Nigeria’s apex bank had told Daily Trust in an interview when he marked his one year in office last month that foreign investors were not interested in Nigerian banks.
He had said: “They have come, they have looked at some of the banks, they have looked at the books and they have walked away. What does that tells you? It tells you how bad those banks are. People came, they were excited. We had four, five and six different banks that came and some of them have shown interest in one or two. Most of them looked at these banks and say they could not imagine that anybody was running the affairs of these banks. They are not interested. They want to come to Nigeria. Meanwhile, you have people who are still expressing doubt on the condition of the banks. They did initial due diligence of the banks and they say they can’t imagine the level of rots in these banks.”
The rescued banks that got the central bank N620billion bailout fund are: Oceanic, Intercontinental, Afribank, Union Bank, FinBank, Skyebank, BankPHB and Equitorial Trust Bank.
Meanwhile, one of the world’s best rating agency Standard & Poor’s had said Tuesday that the Nigerian banks continue to look extremely risky, despite a bail-out of the sector last year.
“The Nigerian banking system is very high risk. The ratings we have for the banks are in the single B category, it’s a very very low level compared to most banks in the world,” John Gibling, managing director for financial insitutions at S&P, told a Nigeria conference.
“We continue to see the Nigerian banking system as very high risk. In regulatory reform there is still a long way to go.”
Standard & Poor’s said the Central Bank of Nigeria may need to guarantee the acquisition of the rescued banks to be able to win the confidence of investors.
But the country’s central bank expects the planned Asset Management Company (AMCON) to soak up bad loans from troubled banks.
