The banking consolidation exercise carried out by the then governor of the central bank Prof. Charles Soludo has come under fire from the current CBN Governor Sanusi Lamido Sanusi who said the exercise was a sham and that many of the banks never raised the capital which they claimed they did.

Sanusi in a 23-page convocation lecture titled, “The Nigerian Banking Industry: What Went Wrong and the Way Forward” he delivered at the Convocation Square of Bayero University Kano on Friday said the consolidation  helped to create bigger banks while it failed to overcome the fundamental weakness in corporate governance in many banks.

The governor said, “A lot of the capital supposedly raised by these so-called ‘mega-banks’ was fake capital financed from depositors’ funds. 30 per cent of the share capital of Intercontinental Bank was purchased with customer deposits. Afribank used depositors’ funds to purchase 80 per cent of its IPO. ”

He added, “The CEO of Oceanic Bank controlled over 35 per cent of the bank through SPVs (Special Purpose Vehicles) borrowing customer deposits. The collapse of the capital market wiped out these customer deposits amounting to hundreds of billions of naira.”

Sanusi also disclosed that while all the unethical practices were going on in the banking sector, the CBN which had a process of capital verification at the beginning of consolidation which was targeted at avoiding bubble capital stopped the check mechanism for unexplained reasons.

He noted that SPVs furnished bank executives with a leeway to lend money to themselves for stock price manipulation or the purchase of estates all over the world. “One bank borrowed money and purchased private jets which we later discovered were registered in the name of the CEO’s son. In another bank the management set up 100 fake companies for the purpose of perpetrating fraud,” he said.

He further said that some banks even engaged in manipulating their books by colluding with other banks to artificially enhance financial positions and therefore stock prices, adding that practices such as converting non-performing loans into commercial papers and bank acceptances and setting up off-balance sheet special purpose vehicles to hide losses were prevalent.

According to the CBN boss, the unethical practices took place under the watchful eyes of the former Governor Soludo, whom he said conducted governance at the apex bank in a “laissez-faire” fashion. He said under Soludo’s reign, internal processes were unstructured and this compromised the CBN’s ability to supervise the industry. Board agendas were set by the governor and consequently reflected his priorities, and there were inadequate committee structures and processes to ensure the CBN board’s independence in assessing whether the CBN was fulfilling its mission.  He also explained that of the 373 circulars issued by the CBN since 2008, only 44 addressed issues relating to the crisis, stressing that “none addressed the issue of corporate governance.

http://www.elombah.com/index.php?option=com_content&view=article&id=2995:soludo-is-a-fraud-sanusi&catid=57:sanusi-lamido-sanusi&Itemid=79

naijaking1:

No need to get into Sanusi vs. Soludo---history will take care of that after their tenure.
However, the governor's suggestion and impication that somehow the money used to form and build these banks were somehow not real money is simply a cheap attempt to succeed at his core objective- the reduction of shareholders equity in these banks.
Even if these shareholders used monoploy money to form these banks, they don't need to be pushed out to make way for people who couldn't invest at the begining.

safeact:

Well, time shall take its course and in this case, there must be a winner and a losser. Lets not crucify anybody yet until d day is ripe then we can now confortably diagnose d duo.  None is guilty of d charges until proven otherwise. I rest my case. Court Order!!!

RoadStar:

Mr Sanusi, you are now in charge, Just fix it !
I cannot help feel that this man has not been able to shake off the shadow of Soludo.
This I believe is due to the fact that people still look back to the days of Soludo with a lot of Nostalgia.

If he is doing a good Job we should start to realise the fruits in years to come.
I hope he is not conceding to the fact that this cannot be achieved.

RoadStar:

This I believe is due to the fact that people still look back to the days of Soludo with a lot of Nostalgia.

If he is doing a good Job we should start to realise the fruits in years to come.

safeact:

The above claims and statement by Sanusi is not guaranttee for him to cal his boss a fraudster.

Ibime:

Sanusi needs to protect CBN at all times. . . .that means he should refrain from criticising Soludo, and cover him up if necessary. . . .CBN should be seen as a credible institution, not a institution prone to corruption and laissez faire regulation.


That said, it is not surprising that after consolidation in 2006, it only took 2 years for the banking bubble to burst. . . . this speaks of poor regulation. . . however, Sanusi will be well advised to protect Soludos legacy at all times.

texazzpete:

As far as I can see, sanusi never called Soludo a fraud.
you're always keen to cast aspersions on sanusi's character and motives. Why no comment on Soludo's actions as described by Sanusi?
It's clear your interest lies not with the economy, but with flagellating Sanusi for his actions against one of your patrons.

MrCrackles:

This is serious. . . .
Soludo
A fraud

mikeansy:

These are what the facts show
By June this year Sanusi will make about one year in office
Since Sanusi's entrance there has been mass sack of workers in banks
There has been drop in confidence in the economy
Businesses have been unable to borrow
Banks are so scare of playing their primary mediation role of lending and borrowing

With all of these scary records in our face all we are told is that anything we see in terms of negative records could have been worse if not for Sanusi. With that kind of standard or performance measurement even the woman who sells tomato & pepper at ojueleba market can run the CBN.

Now they are telling us that our economy will stabilise in 10years time and their 'Risk management' will begin to bear fruits in 10years. My personal worry is not whether the economy will stabilise but what it is they want to stabilise. Because you can achieve stability in Niger Republic and can also achieve Stability in UK. The difference is the kind of economy you stabilise.

You have to create an economy first before you risk manage it. otherwise you will have nothing to risk manage. Why Sanusi can not understand this simple concept is shocking. Our economy at the moment is hugely dependent on oil. Until we diversify we will continue to have a volatile economy and no amount of misguided IMF Textbook Risk Management Principles will change much. So the question is how do you diversify if banks are so scared to lend to Enterpreneurs?

I am no longer interested in this debate. Sanusi should grow up and own his own failures and do something to correct them rather than claiming that he is preventing some imaginary catastrophe which only exists in his head.

There is no where else in the world where people glorify public officials for setting the standards for themselves this low.

naijaking1:

You said it all!
In psychiatry, I think they call his action--projection. He's projecting his failure to everybody and anybody, thereby diverting attention from himself. This technique can be used to fool a whole lot of people, but it doesn't change the facts. A lot of people have been fooled, and here too.

We saw the first banking reform that focused on consolidation but it seemed the consolidated banks are no longer strong as we were being made to believe.

As someone who does business now, how do you think the crisis in the banking sector has affected the economy?


Banking, finance and the economy are based on perceptions. The US is the biggest debtor in the world but there is a perception that it has tremendous capacity so despite their huge debts, China and the rest of the world are falling over to loan them money because they are banking on the resourcefulness of the country. A couple of months back, 12 Nigerian banks featured among the list of one thousand largest banks in the world. It was all based on perception. I support what Sanusi has done but I think it could have been done differently. You don’t create a panic in your economy. There are LC transactions originating from Nigerian banks and certified by a prime U.S. bank still not being accepted internationally.

There are more cash transactions now because Letters of Credit are not being accepted. So the protection the letter of credit affords you is lost. But certainly the banks had gone overboard from the facts we have today but, we should have done it mindful of the larger impact it could have on the economy. We also erred in not protecting our stock market. Virtually everyone was in the stock market then and when there are a mass of people under a roof protect the house. One thing that gives us confidence in our nation is wealth and government ought to strive to secure this. But when we do nothing about it and when it crashes it has a ripple effect. An immediate effect of the crash was a run on bank stocks because a lot of them had dwindled and after that a housing crisis and housing prices crashed. Assets that were created over the years now amount to nothing. So all of us in the country are losers because wealth has devalued.

Government cannot sit back and wash its hands away from these institutions because even though the stock market is private it’s a measure of public wealth and confidence in the economy.
It is all about jobs and people. The banks are also laying-off people and there are social consequences. If one is laid off from a bank he’d probably have to move homes and relocate his kids from school. Lifestyles change and it has a ripple effect. That is why western governments provide social security. Criminality has a bearing with unemployment.”

mikeansy:

Utomi Faults CBN's Action On BankPHB , launches Two Books


Professor Pat Utomi has faulted the actions of the Central Bank of Nigeria (CBN) on BankPHB, disclosing that the situation in the bank was not as grave as the CBN painted it.

ndu_chucks:

What do you expect? Pat Utomi was one of the named debtors with bad loans.

ndu_chucks:

What do you expect? Pat Utomi was one of the named debtors with bad loans.

pcicero:

My humble opinion is that Sanusi is confused and what he only does now is double-speaking without any concrete agenda for the economy.

[size=16pt]N620bn bailout: Court strikes suit against Sanusi[/size]

A Federal High Court in Lagos has struck out a suit challenging the decision by the Central Bank of Nigeria (CBN) to disburse about N620 billion to some ailing banks as bailout funds.

The suit filed last year by a member of the House of Representatives Femi Gbajabiamila had the CBN and its governor Sanusi Lamido Sanusi as defendants.

Although the judge, Justice Binta Nyako, held that the plaintiff has the locus standi to file the case, she identified some defects in it, which formed the basis of her decision.

As against the defendants’ argument that the plaintiff lacked the right to sue having failed to show that he suffered any special injury different from that suffered by other members of the public, the judge held that he could sue in view of his status.

Justice Nyako held that as a member of the National Assembly who swore to protect the Constitution, he had the right to sue in challenge of the defendants’ action where it is felt that such action constituted a breach of the Constitution.

The judge struck out a substantial portion of the affidavit supporting the originating summons on the ground that the information contained therein offended certain provisions of the Evidence Act.

In striking out the suit, Justice Nyako held that having struck out a substantial part of the affidavit supporting the originating summons, there was nothing left for her to determine in the substantive suit.

The plaintiff had urged the court to determine whether the CBN Act and the Banks and Financial Institutions Act (BOFIA) authorised the defendants to raise money and disburse same without the consent of the National Assembly.