- Blame regulators for banks’ crisis – Shareholders
Following the takeover of the board and management of Skye Bank Plc by the Central Bank of Nigeria, there are strong indications that more managing directors and board members of some top banks may soon lose their jobs over corporate governance cases arising mainly from liquidity issues and insider malpractices.
Investigations have revealed that the Chief Executive Officers of three of Nigeria’s celebrated banks are now gripped in palpable fear of being swept off by the sack gale hovering in the banking sector.
According to a reliable source at the apex bank, the affected CEOs are currently running from pillar to post in their efforts to save their jobs.
The Non-Performing Loan portfolio of the three banks in question stand at N548 billion, according to a debtors’ list recently released by the Asset Management Company of Nigeria.
Specifically, The Point’s investigation revealed that the management team of one of the banks, which recorded a huge toxic asset of over N60 billion as at the end of December 2011 and was later acquired by the Asset Management Company of Nigeria, is top on the list.
An insider source told our correspondent that the MD and other top executives of the bank, may be forced to resign in a matter of weeks.
A top source at the apex bank also disclosed that the same bank gave a loan worth over N300 billion to a company in the oil and gas sector in the recent past.
The loan was later approved to be written off by the apex bank, but it was done at the expense of the bank’s profit for four years.
The Point gathered that those four years were nightmares for the bank’s shareholders as they neither received dividend nor bonus.
The CBN is now investigating one of the bank’s former MDs, who retired recently and took a severance package running into several millions of naira.
“The unfortunate thing is that the bank sacrificed about 1,000 of its staff, who were mostly low earners, to cover the tracks of its executive. If found guilty, all of them shall be prosecuted,” our source said.
The Point’s findings also show that some of the companies that contributed to the bank’s toxic assets are Petroleum Brokers Limited, School XP Interactive, which owes about N1.3 billion; Apostle Hayford Alile’s Pokat Nigeria Limited and Prince Tony Momoh’s Osigwe Foods & Agro Industries, which is indebted to the tune of N2 billion, among others.
Yet, another bank on the radar of the apex bank over liquidity status is an old indigenous financial institution, which seems to have been the Number 1 bank in terms of depositors’ confidence for years. According to a list released early in July 2016, the bank recorded the highest toxic asset that had been acquired cummulatively by AMCON over the years. Five of its worst debtors owed the bank about N187 billion.
While Seawolf Oilfield Services owed N160 billion, about 80 per cent of the total bad debt, Wale Babalakin’s Resort International Limited owed over N15 billion. Karim Olayinka’s Shoreline Power Company and MacDonald Memorial International Institute also owed N6 billion and N2 billion respectively.
Shockingly, in spite of AMCON’s acquisition of its toxic assets during the 2009/10 bank’s liquidity crisis, the financial house seems undetered in its non-adherence to strict corporate governance rules governing banking operations.
As at 2015, the bank’s bad book had again weighed over N45 billion, with 10 of its worst debtors having accessed loan facilities worth about N31 billion.
Some of the debtors include Shield Petroleum Limited (N6.9 billion); Ajaokuta Steel Company (N6.1 billion); Starcomms Nigeria (N5.5 billion) and Sirius Energy Resources Limited (N2.2 billion), among others.
The Point also found that one of its former chairmen owed the bank over N80 billion, a loan that had been granted some years back.
A top source at the bank’s headquarters, who pleaded anonymity, told The Point that “Debt recovery has been challenging and tasking for the management, especially the immediate past managing director.
“Each time he tried to introduce certain recovery strategies, some forces within and outside the bank frustrated the actions. That, to certain extent, had contributed to the bank’s dwindling state,” he added.
Another bank on the radar of the CBN is one of the new generation banks with its headquarters located close to the Lekki axis in Lagos State.
If the bank’s management fails to meet the minimum threshold in critical prudential and adequacy ratios, the apex regulator may be forced to show its chairman and directors the exit door, like it did to Skye Bank.
To correct observed infractions in the bank, investigations show that the CBN had met several times with the management and board of the bank as part of its close management strategy whenever a bank’s financial or governance situation poses threats to the overall stability of the financial system.
According to AMCON’s list of top 100 debtors released in July 2016, four of its worst debtors owed the bank about N10 billion. They are Ofada Veetee rice (N1.5 billion), MacDonald Memorial International (N2 billion), Sarki Surajo Petroleum (N1.5 billion) and Pokat Nigeria (N1 billion), among others.
The bank’s non-performing loans had hit about N50 billion and the list showed that about N20 billion were owed by both local and international companies. Some of them include the Akwa Ibom Government’s Ibom Power Company Limited (N5.8 billion), Saidom Africa Limited (N2.4 billion) and EPIC Investments Trust Company (N1.5 billion), among others.
Also, a source in the banking sector told The Point that the bank had given a loan worth N2.1 billion to a top politician who wanted to contest in the 2015 governorship election in the South-Eastern part of the country.
Unfortunately, the politician was unsuccessful in his bid, as he lost at the primary elections stage. “Though, the management had raised fund from other sources to cover up but there is still a hole of over N500 million. Considering other pressing liquidity issues, the only way out of this is to write off the debt to the detriment of shareholders,” the source said.
BLAME REGULATORS – SHAREHOLDERS
The shareholders of the Deposit Money Banks have, however, expressed fears over their investments, as they cast a vote of no confidence on the apex bank, the Nigerian Stock Exchange and the Securities and Exchange Commission.
They faulted the regulators of the banking sector and capital market for failing to carry out their oversight functions in the financial system.
The President, Nigeria Constance Shareholders Association, Alhaji Shehu Mikail, blamed the CBN boss, Mr. Godwin Emefiele; the NSE chief, Mr. Oscar Onyema; and SEC boss, Alhaji Mounir Gwarzo, for not being proactive in their regulatory functions.
He told The Point that he had written several petitions to the agencies against the managementof Diamond Bank and First Holding Plc over their neglect of corporate governance in the day-to-day administration of the institutions.
“We are ready to charge them to court because we have warned them over time about the loopholes in the system but the regulators’ argument, especially NSE and SEC, is that we are minority shareholders and that our voices do not count.
“There are a lot of illegal dealings going on in the banks and the regulators have been looking the other way. We are taking them up on this because we know some bank MDs will go too. We lost trillions of naira in 2009 but we won’t allow a reccurrence. We have met and agreed to vote them out in the next annual general meetings,” he added.
The National Coordinator, Concerned Shareholders Group, Mr. Olusegun Owolabi, lamented the ‘selfish interest’ attitude of most of the directors of the banks. He attributed the dwindling state of most banks to the inability of the directors to protect the interest of the shareholders because of their quest to enrich themselves at the expense of investors.
He insisted that most of the affected banks were the ones founded by individuals that had refused to admit that the institutions did not belong to them again.
“Some of them are chairmen and they want their children to be the MD, with cousins on the board. They approve loans to families and friends without following due process,” he added.
EXPERTS FROWN AT CBN’s APPROACH
While investors are blaming the regulators and expressing the hope that more bank chiefs will be eased out by the CBN, financial analysts have argued that the apex bank will not allow that to happen.
An industry watcher, Ms Ayo Adeniji, explained that, aside from the former management of Skye Bank, who were affected by the sack, the development would not affect others because the CBN had declared that the banks were safe.
According to him, Emefiele will address the issue like his predecessor, Prof. Charles Soludo, who addressed a similar liquidity issue by addressing MDs of ailing banks in closed door meetings.
She stated, “Despite the glaring poor state of Skye Bank, which led to the disengagement of some executives, the CBN governor came out to tell us the bank is safe and not distressed. How can a bank with huge NPL, whose management you have met several times to boost its liquidity state and failed, be safe and sound?
“It is one thing to assure depositors that their savings are safe and it is another thing for you to tell the truth about the state of the banks, so that investors will know their fate like Alhaji Lamido Sanusi did in 2009.”
For the Managing Partner, A & E consult, Dr. Ade Esho, Emefiele should apologise to Nigerians, especially the banking public, and resign. The economist argued that the CBN, under Emefiele’s watch, failed to take responsibility for its negligence.
He insisted that the CBN governor should have known that Skye Bank, and others that delayed their remittance to the Treasury Single Account, had capital adequacy ratio and ought to have addressed the liquidity issue earlier.
“The negligence will pull the market indicators of the banking index further and create panic in the financial system. The banks are barely lending and struggling to stay afloat, and that is the reason they invest more in treasury bills and have become aversed to taking risks. Their exposure to the power, oil and gas sectors, which are only long-term investments, will depress the performance of the banks for now,” he said.
WE’RE FOCUSED AND PROACTIVE – CBN
Contrary to the allegations of laxity, however, the CBN has insisted that its management has been proactive in ensuring that Nigerian banks are safe for either deposits or investment.
The acting Director, Corporate Communications, CBN, Mr. Isaac Okoroafor, argued that the bank could not have responded earlier than it did to the persistent failure of Skye Bank to meet thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN lending window.
“No Nigerian bank is distressed, they remain healthy. Depositors, shareholders and all relevant stakeholders should be assured that there is no reason for concern or panic as we seek their continued cooperation at this time,” he insisted.