Bank CEOs Sack: How The System May Be Affected

The Central Bank of Nigeria (CBN) has moved decisively to restore public confidence in the banking system by axing five managing directors of major banks in Nigeria. Making the announcement last Friday at media briefing, in Lagos, Sanusi Lamido Sanusi, CBN Governor, explained that “failure to act to secure the financial health of these banks will clearly place the system at risk. The Central Bank has a responsibility to act to protect all depositors and creditors and ensure that no one loses money due to bank failure.”
It is his opinion that the apex bank also needed to move decisively to remove this principal cause of financial instability and restore confidence in the banking system.
On how this will affect the banking industry in terms of stability, he posits: “We are conscious of the fact that changing management alone will not resolve the problem. Consequently, the CBN is injecting a total of about N400 billion into these banks with immediate effect in form of tier two capital to be repaid from proceeds of capitalisation in the near future.”
It is Sanusi’s opinion that the injection is sufficient to resolve and stabilise all the institutions and enable them continue normal business.
Nigerians are lauding the move by the CBN to stabilise and restore confidence in the financial system. Niyi Akinsiju, Publisher of Fortune & Class Magazine, in a telephone chat with M2, praised the action as “smart and proactive.” He opines that “confidence will come into the money market following the CBN efforts.”
In the same vein, Muyiwa Akintunde, Executive Director, Marketing Mix, says, “it is a positive development by the CBN to stop the rot in the banking system.”
Akinsiju recalls that in the last 20 months, people have been voicing it that there was a problem. He decried that for some inexplicable reasons, “honest opinion had been lacking from both professionals and media.” Akintunde agrees that “all this while, doubts existed about stability” in the banking system in Nigeria.
This could be traceable to concerted efforts by the immediate past CBN governor, Prof Chukwuma C Soludo, who nurtured the consolidation. He laboured to protect the institutions that evolved under him, to the extent of opening the Extended Discount Window (EDW), which allowed the pilling up of debt upon debt.
Akintunde sees this as an indictment on the efforts of the past regime at CBN to consolidate the banks. In his words: “With Soludo’s consolidation, it appeared as if Nigerian banks were strong and could compete internationally.” This development comes with the signal that there might be a lot more trouble in the background of the TAR report, he recalls.
With this move by the CBN, Nigerians can expect stronger financial institutions. As the banks would get new management teams, this would instil confidence. Sanusi’s pronouncement that the government would not be waiting endlessly for the repayment of the money now being invested as Tier Two Capital means that the banks would have to quickly realign, source for capital independently or be acquired by stronger banks. This, according to Akinsiju, would mean that whatever institutions emerge would be seen to be good.
A concerned Nigerian, while also lauding the development, opines that this is just a continuation of capitalism. His claim is that Soludo used the window of consolidation to create opportunities for his constituency. Now, Sanusi is towing the same path. The source maintained that recapitalising the banks would be undertaken by the serving CBN governor’s constituency, for their own benefits.
Akintunde does not totally agree with this, maintaining that the CBN has to be clear on its objective. “I want to believe that the objective is not to sell the banks to some moneybags. That will drag us back. If the objective is to refloat the banks so that they can meet their obligations, in a short while the banks should get back on track.” He is confident that the CBN under the new governor means well.
The banks that lost their managing directors include, Afribank (S Adigwe), Finbank (Okey Nwosu), Intercontinental Bank (Erastus Akingbola), Oceanic Bank (Cecilia Ibru) and Union Bank of Nigeria (Barth Ebong).
They will now be managed by Nebolisah Arah (Afribank), Suxanne Iroche (Mrs) (Finbank), Mahmud L Alabi (Intercontinental Bank), John Aboh (Oceanic Bank), and Funke Osibodu (Union Bank of Nigeria).
Nigerians are generally not surprised at this move, as seen in the opinions of Akinsiju and Akintunde. It is hoped that it will help to stabilise and infuse more confidence in the system, provided the CBN and the interim managements they have put in place live up the billing.