By Edugie Oyaima
Especially for the millions of Nigerians who are, for all practical purposes, eking out a subsistence living as salaried workers or dependents on salary earners, no experience can be more traumatic than getting to your bank on a late Friday afternoon, expecting to collect your hard-earned monthly salary, only to be told that your cheque "hasn't cleared." Petty traders and small and medium business operators whose lives depend on daily commercial activities loathe the spectre of not being able to access their bank accounts. Indeed, anyone who was a victim of the masterminds of the wonder bank scourge of the mid-1980s will not think twice about endorsing wholesale the efforts by Sanusi Lamido Sanusi to sanitise the banking sector.
Those were some of the features of our past banking insanity. And they are some of the reasons why the need for reforms in the sector will never be in doubt. Indeed, the question has to be: How come we have the tendency to allow rot to set into our banking system before we start straightening things up? We all thought that the recapitalisation exercise carried out by the former CBN governor, Charles Soludo, when all the banks struggled to meet up with the expected level of liquidity, was the end of the problem.
But, as things have turned out, this was not without its challenges. It seems that, in an effort to acquit themselves in the court of competition, many resorted to various methods, such as borrowing money to buy shares. A case in point is Afribank, which in a desperate ploy to beat off a take over bid by Access Bank, is alleged to have used operating funds to buy back its own shares - i.e. the bank gave out loans from operating funds for the purpose of buying its own shares. Such transaction is not in itself unlawful. The law only requires that the CBN should consent to the use of the shares of a bank as security for loan granted by the bank.
What happened to institutional mechanisms for dealing with such sharp practices as hostile takeovers manoeuvres that accounted for much of the instability and defensive strategy against takeovers by banks that bedevilled the system? It was simply like fire on the mountain. The weaker banks that had no alternative to running from the dangers they saw did so like drowning swimmers who cling to just any straw in sight.
So it is impossible to condemn culprits without some dose of empathy. There is also the puzzle that the CBN, in the case of Access Bank's and Bank PHB's pursuit of Afribank, tacitly approved buyout of both institutions as a way of dealing with the instability that bedevilled Afribank as a result of those other banks targeting Afribank for takeover. The CBN can't claim that it was totally unaware of the buy-back plan. Indeed in the Afribank situation all criminal charges in court against bank officials seem to relate to only the issues around buyback of shares and the shares are all intact with its subsidiary though they may have lost value in the market. For those keenly following the sanitisation process, there is need for clarification of issues. For example, doesn't the fact that the EFCC has been able to recover a sizeable portion of some of the alleged "bad" loans given out by the banks show that the loans were not actually bad? Can it be said that a tenured loan has become bad when the payback time has not been exceeded?
But there is a lot of merit in the Sanusi intervention, not the least being the fact that, for the first time, many of the so-called "big men" have so speedily been compelled to service their loans. However, the point still needs to be made that the greater problem with the banks is systemic. It seems that banks are all too often unable to insulate themselves from the rot in the larger society. Influence peddlers, using government muscle, to easily get whatever they want from banks, but find it difficult to honour their commitments to these banks as and when due. It is therefore understandable why there was so much interest on the part of these influence peddlers to valiantly campaign for the renewal of Soludo's tenure. It is clear that many of the big debtors who have been rushing to settle their debts after being visited by the EFCC would have found no reason to honour their commitments to their creditors.
Let's go back to Sanusi's sanitisation approach. To the extent that the chief executives, directors and boards of the discredited banks have been criminalised, it is difficult to differentiate between the various infractions committed. CBN would be doing the Nigerian, nay global, community a world of good if it re-categorises the infractions against its rules by the banks based on their type of offences. Some of the erstwhile chief executives gave out billions of naira as loans to fronts, friends and business associates without caring that judgement day would come someday. In some cases, barefaced stealing of operating funds has been alleged. These are obviously serious allegations of criminality. But it serves no purpose to lump all the banks together and slap them with similar criminal charges as if their offences are the same. Some of the cases in court can be more appropriately dealt with as civil cases.
Indeed by criminalisation of a case which could have been disposed of as civil, the state takes an added risk because it would have to carry the burden of proof to show criminal intent. In cases such as that of the former Managing Director of Afribank, Sebastian Adigwe, that would be quite difficult to prove. It would probably make more sense for the CBN to treat civil cases as civil because it would be much easier for the state to prove negligence on the part of the accused and make him pay the adjudged penalties. CBN should itself be wary of protracted litigations of a criminal case that could best have been handled as civil. - Guardian
Oyaima, an international development finance analyst, lives in Abuja.