Tsunami Sanusi: Where Would The Wild Fire Stop?

Several bank executives and their board members are already standing trial following their sack by the apex bank last August. Expectedly, there are spates of protests here and there. Kenneth O. Eze puts the issues in perspective, pondering if Sanusi can survive the ripple effects of the tsunami he instigated.

Voices have continued to dissent on the banking tsunami since August 14, 2009, when the governor of the Central Bank of Nigeria (CBN), Mal Sanusi Lamido Sanusi, read the riot act against five banks, sacking their managements and investing N420 billion into them as Tier Two capital.
The peak so far has seen Nigeria’s lawmakers lending a voice to the drama. The House of Representatives’ Committee on Banking and Currency has thrown an interesting light on the issue, with the claim that the CBN lacked the legal grounds to intervene in the banks the way it did.
The CBN counters by saying that it drew legal backing from the CBN Act of 2007. This has seen the Committee formally requesting the Attorney General of the Federation (AGF) to present an appropriation bill before the lawmakers to regularise Sanusi’s action.
The Committee is performing its constitutional duty of oversight functions. Sanusi is also carrying out his duty as governor of the CBN. Both are now eyeball to eyeball. Where does this lead the economy already comatose by various actions and inactions by the government in concert with the CBN?
The twist is weighty on this matter because one of the major personas, a former governor of Rivers State, Peter Odili, swiftly approached the civil court to obtain an order baring the Economic and Financial Crimes Commission (EFCC), and the CBN from harassing him over his indebtedness to one of the troubled banks. Jimoh Ibrahim has boldly stated that it is no criminal act to owe a bank and would want to be excused from the smear campaign currently going on.
Some shareholders of some of the affected banks have made public statements condemning the unilateral takeover of their investments by the CBN. Some petitions in this regard are awaiting judicial intervention.
Erastus Akingbola, the deposed managing director of Intercontinental Bank has challenged the action in court. Feelers indicate that he is deliberately avoiding the EFCC and the CBN, pending the outcome of his petition for judicial interpretation of the action.
Other key acts, having submitted themselves to the law, are said to have approached or are preparing to approach the courts to order a review of the action to gain freedom and escape indictment, redeeming their careers in the process.
In the face of these, Dele Momodu, Publisher of Ovation Magazine, raised a voice querying the rationale behind the action and the public outcry of condemnation meted out to the bank chiefs facing travails. He is of the opinion that the guilty verdict appeared to be hastily passed on the people without as much as a chance of fair hearing, wondering if “we are no longer capable of objective reasoning in this country.”
Making no effort to absolve the accused persons of blame, Momodu seems to be drawing from the general legal standpoint that an accused is deemed innocent until proven guilty. His words: “Most of the commentators were quick to pass the guilty verdict on the gentlemen and lady. No one was ready to give them the benefit of the doubt.”
All these make it look like the CBN has put itself in the position of the wrestler who rushed furiously only to meet the danger of a terrible fall, to paraphrase an Igbo proverb used in Chinua Achebe’s Things Fall Apart.
The lightening-speed at which Sanusi has gone about the opening scenes of his act requires a touch of supernatural genius to come-off flawless. Issues being thrown up by the reforms are reinforcing the need, but Sunny Nwosu, the National Coordinator of the Independent Shareholders Association of Nigeria (ISAN) raises a pertinent issue: “The CBN has refused to tell the role of the CBN’s three resident examiners in all Nigerian banks, including the indicted ones.”
The CBN had so much concern for the financial health of the banks and the economy that it posted three resident examiners to each bank to review the books at source. This was in addition to the external auditors that recommended the accounts to the CBN for approval. The accounts passed through several levels of examinations and re-examination to meet with the apex bank’s approval before being presented to shareholders, most of whom were ignorant that the financial reports they lauded were doctored.
Nwosu recalls that Sanusi just mounted the saddle and unfolded the reforms in a manner that smacks suspicions. Stakeholders would have been satiated with thorough investigations carried out, queries raised and resolved before this far reaching reforms.
His words: “The hurried manner in which the so called examinations were done and the attendant series of rebuttals by perceived debtors show to a large extent that the reform in the banking sector does not put the general economy into consideration.”
But Farida Waziri, EFCC Chairman, opines that “it is unfortunate that some of the bank chiefs in trouble at present abused their offices by granting unsecured loans in total disregard to banking regulations.”
The CBN appears to be working on strengthening the economy by strengthening the financial system, through bringing to book those that discharged their duties in flagrant disregard to banking regulations, but there are concerns that the apex bank is creating loopholes for the perceived culprits to wriggle out. Part of these, pundits posit, is the attendant hurry on the reforms that forced the CBN to slam the door against the bankers without the chance of self defence.
Uju Ogubunka, the Registrar/Chief Executive of the Chartered Institute of Bankers of Nigeria (CIBN), voices support for the reforms, but cautions that they must be carried out properly. Ogubunka counsels that “all agencies and individuals involved in the task of sanitising the banking system should endeavour to approach their duties professionally and in strict adherence to the extant laws of the land, due process and best practice.”
Incidentally, Sanusi’s immediate constituency does not entirely share the opinion of their Chief Registrar. Lots of bankers that spoke to M2, in preference to their identities being withheld because of the sensitive nature of the issue, cheer the move. A source in one of the affected banks told us that “it would have been a disaster to leave this bank without being sure of one’s disengagement benefits because of the recklessness of some individuals.”
In another bank, among the 14 that are still being audited, a source applauded the intervention as having the ability to save the financial system and by extension the economy. According to the source, the House’s Committee is just politicising the matter.
While defending his action before the Committee on September 1, 2009, Sanusi threatened to resign if the actions of the CBN under him turn out to be flawed in any reasonable manner. Nigerians note that this is about the first time a public officer would be beating his chest to accept personal responsibility for the institution they run.
Sanusi’s words: “I will resign if a lot of the decisions we have taken are wrong. But I have no doubt in my mind that the decisions that we have taken are after objective analysis of the facts.” But stakeholders opine that an objective analysis would have taken a longer time than the time the CBN spent before reading the riot act and of necessity would have included the chance of fair hearing from the accused persons.
Continuing, Sanusi said, “If there was a mistake, if there was fundamental error, as the governor, I will take personal responsibility and if I have to resign, I will.”
One of the fundamental errors seems to be what Erastus Akingbola, the managing director of Intercontinental Bank deposed by Sanusi, is hinging his petition to the court on. He avers that he was not allowed access to the report indicting his bank and management. Lawyers are of the opinion that it is important that the accused must be given opportunity of fair hearing and defence before being adjudged guilty.
This position of not having access to the accusation is held by many as a major flaw that could compel the courts to scuttle Sanusi’s reforms no matter how well intentioned.
Another major flaw that the accused persons are bound to peddle before the courts is the seeming breach of section 34 of the CBN Act, 2007: Prohibited Activities. The section precludes the CBN from winding-up or selling banks. The apex bank is expressly prohibited from holding shares of banks and cannot take over a public-quoted company.
Paragraph (a) states that the CBN “shall not engage in trade or otherwise have a direct interest in any commercial, agricultural or industrial undertaking, except as provided in sections 27 to 32.” The apex bank is only empowered to dabble into such investments temporarily albeit in recovery of debt owed it. Such interests, according to law, “shall be disposed of at the earliest suitable time.”
In the same vein, section 34(b) states that the CBN shall not, “except as provided in section 31 of this Act, purchase the shares of any corporation or company, including the shares of any banking institution.” Section 31 that tends to endorse CBN’s investment in shares and debentures of any kind provides that such venture must be “with the approval of or under the authority of the federal government for the purpose of promoting development ….”
Media reports have it that the so called healthy banks are yet to accept the “salvation” offered by the governor. One of the reasons adduced by Sanusi for his intervention was the need for the apex bank to guarantee inter-bank loans needed by the weak banks. If reports in the media are to be taken seriously, the healthy banks have not accepted their classified counterparts as risk worth taking. This seems to be a measure of the acceptance and success of Sanusi’s reforms, by his colleagues in his immediate constituency, at its early stages.
These issues combine with Sanusi’s resolute disposition to fuel concerned citizens’ opinions that he is not keen on what the statute books say or indeed what voices of reason echo. He seems headed for a destination and would be deterred by neither law nor reason, sources told M2.
Given the eulogies that the CBN earned under the leadership of the former governor, Prof Chukwuma C Soludo, the thoroughness and intellectual action that Nigerians have come to expect from their apex bank, people express dismay at the recent turn of events. A grave concern to a segment of Nigerians is the highhandedness with which Sanusi is going about his reforms. Not many Nigerians have had the gut to accept responsibility and issue the resignation threat for decisions reached under them.
The five year tenure of the governorship of the CBN is a marathon not a dash. Sanusi and his drummers should brace up to it, because some of the issues raised now would surely keep resurfacing. The long journey of Savannah Bank to upturning the CBN’s revocation of its operating license is a case in point.
Would the judiciary be swayed by the thinking that the reforms could strengthen the financial system and the economy and had to be done on exigency? Would the learned people insist on strict adherence to the extant laws of the land, due process and best practice? Is there a likelihood that Sanusi can make good his promise to resign? Would the National Assembly accept his resignation? Would Sanusi be engulfed by the flame he kindled by starting the banking tsunami of August 2009? Only time will provide answers to these and many more issues as the governor progresses with his agenda.