By Babajide Komolafe & Michael EbohLAGOS—BANKS in the country are beginning to experience difficulties in addressing the new and rising wave of non-performing loans in their operations, brought about by the current credit freeze and slowdown in economic activities.
According to a senior banker who spoke to Vanguard, last week, on the condition of anonymity, accounts that were performing before had become non-performing as a result of the problem in the industry.
Also speaking, a bank treasurer hinted of a possible increase in provisioning for bad debts and negative bottom lines by banks in the coming financial year.
He said: “The meaning is that we have to do more provisioning for non-performing loans, resulting to more losses than was declared last year.
“What we are seeing is the multiplier effect of the banking reforms. Now because the banks and bankers are not spending, other businesses are suffering lack of patronage and sacking staff. But it is also aggravating the problem in the industry as those of them that took bank loans can’t repay and thereby worsening the problem of banks.”
17 Responses for “Banks face new credit squeeze”
1.Jimmy Salvage says:
March 22, 2010 at 9:52 pm
The Cost of Sanusi
I hope Sanusi should realise by now that in banking and finance let alone economics that 2+2 is not = 4. You either get 2+2 = 3 or = 5. There is no linearity but curve linear. Banking is not religion, the Gospel truth but business.
You people are yet to understand Soludo in his application of economics. He is not stupid. There are certain issues you over look and then draw a line. Soludo was aware that there were non performing loans; some banks will have and had liquidity problems. He then created Expanded Discount Window for those banks that may be in these situations to take refuge until they recovered through normal business, with enough money to trade. You have to use money to make money.
With this banking, lending and finances went on, the economy of the country remained on course. These were, if you do not have your money, you have to get credit to be able to swim to safety and recover. Here intensive control and supervision, according to Soludo, was not paramount as the line which no bank must step over was drawn.
As these cushions were in place Soludo continued to reassure the nation, confidence, banking and financial activities maximise. Today those who do not understand the intricacies of the application of economics and methods continue to vilify Soludo, in ignorance of how finance is made to work, even in peculiar situations.
Sanusi, the Mr Religion and the North must catch up, came. They are sinners. Crucify them. A normal person who had no premeditated hatred, bias and sectional agenda would have in his dealings and measures been sensitive to the country as a whole. What is the state of our banking today?
Are the few wrongs of the deposed banks chiefs that would have been dealt with in the normal ways and the normal business of banking goes on within the solid banking foundation that was on ground worth what Sanusi has single handedly made our banking industry, finances and economy to be?
Assets Management Company is only necessary in a country where bad debts were incurred for the growth of the real sector that on the other hand grew the economy of the country. It is not established to absorb the debts from non performing loans that were taken for speculative trading; loans that were taken and remitted out of the country or held back to be donated to the PDP. Today what is the cost of Sanusi as the Governor of the CBN? The darkness he represents is yet to crystallise.


That Central Bank Advertorial: Matters Arising Tiko Emmanuel Okoye, ichietiko@yahoo.com 0805-410-3468 (sms) only
Evidence that the handshake by groups viscerally opposed to ongoing banking reforms had gone beyond the elbow glaringly manifested itself last week Thursday when the Central Bank of Nigeria (CBN) took the unprecedented step of placing rebuttal advertorials – four full pages in all – in several national newspapers. It was an open secret in the political, financial and media circles that CBN Governor Sanusi Lamido Sanusi has been under siege since his tsunami washed away eight bank managing directors and their executive directors. The stiff resistance and opposition to the reform programme were both predictable and predicted. In my piece titled “Hurricane Sanusi: Periscoping the Eye of the Storm” (September 9, 2009), I had observed that “Sanusi must have realised by now that he’s up against very powerful and highly organised ‘evil geniuses,’ who are willing to say and do anything to protect their private empires even if it means subverting the nation’s overall interest.” Still, no one could have imagined the intensity, relentlessness and ubiquity of those involved. For a long time, Sanusi spoke and acted as if all the criticisms amounted to nothing more than water off a duck’s back with him. But a more discerning observer would’ve easily noticed that despite his determined efforts to behave as if he was inured to their activities, Sanusi’s increasing use of innuendoes was a clear sign that the criticisms were beginning to take their toll. An excerpt from the foregoing referenced essay is pertinent: “Nigerians are indeed a funny lot. At the initial stage when the dismissal of five bank chief executive officers was announced, encomiums and plaudits poured in from practically all corners of the nation like confetti on a bridal train. But it didn’t take long for the tide to change…Still, most people generally agree that the nation’s banking industry is deeply troubled. There’s also a consensus that past CBN managements had been too lenient with transgressing bank operators. If the last premise is correct – and empirical evidence suggests it is – why the present hue and cry about Sanusi’s actions?” This seems to be the billion naira question.I’m sure that Sanusi in his more reflective moments would be wondering what went wrong. I say this because the paid advertorial is proof that the apex bank governor has perished the thought of living in self-denial. And I conjecture a fire of another incendiary kind on the mountain as chiefly attributable to this sudden change of methodology. I suspect that Sanusi decided to take notice because one or two persons that have his ears have convinced him that he needs to properly articulate his case in the court of public opinion because of the dire consequences of allowing ‘opposition’ groups like Renaissance Professionals to win the ‘propaganda war.’ I might even venture as far as speculating that his admirers in the corridors of power have hinted him that the new pharaoh (Acting President Goodluck Jonathan) might well be disposed to paying heed to the criticisms of anti-reform critics if by acts of omission on his part he allowed the latter to define his agenda for him. This is not to say that someone like Sanusi would ever lobby anyone to keep him in the CBN Governor’s suite but the fact remains that he’s very passionate about the reform programme and would deem it a great personal and professional failure if he wasn’t allowed to bring his ideas to fruition.In my own view, Sanusi was too liberal with his comments. In an earlier essay titled “Reflections on Sanusi’s ‘My Agenda’” (July 9, 2009), I advised Sanusi to apply the brakes on public speaking and follow of his colleagues in other climes who hardly speak because whenever they do the markets react. But Sanusi can hardly be faulted. He made it clear from the beginning that the puritanical professional garb of the conventional central bank governor wasn’t for him; instead he declared his willingness to talk and act like a politician since he was an integral part of government. He was unmindful of the Burmese proverb that says that “Too much talk will include errors” or the Holy Book that cautions that sin lurks in a multitude of words. Critics used key comments made by Sanusi to skillfully cast doubt on the sincerity and transparency of the banking reform agenda. Furthermore, frequent flip-flops over issues such as ownership of the rescued banks, post-rescue plans and status of existing shareholders, among others, generated strident commentaries and newspaper editorials on the lack of a blueprint clearly indicating an exit strategy and a well-calibrated way forward. The CBN advertorial can, therefore, be seen as the apex bank’s answer to such doubting Thomases. Captioned “Re-Blueprint/Agenda for Banking Reforms,” the advertorial was intended to rubbish “persistent allegations by a few Nigerians that (the CBN’s) ongoing banking reforms…are being pursued without an articulated blueprint or agenda.” Upon closer scrutiny, the advertorial turned out to be a reproduction of an interview Sanusi granted to the West African correspondent of Financial Times of London on June 21, 2009, about two weeks after he assumed duty. Based on the views expressed by Sanusi in the said interview the apex bank wants Nigerians to believe that a blueprint does indeed exist and that measures adopted so far signpost the ideals clearly expressed by its helmsman.I beg to strongly disagree. With all due respect, what Sanusi expressed in the interview are mere statements of intention. It couldn’t have been otherwise because with only two weeks on the job he was yet to fully come to grips with the enormity of his assignment. Some of his responses were understandably ambivalent and/or evasive because the issues involved required further scrutiny. A few examples would suffice. In responding to a teaser whether he would continue to turn a blind eye to an alleged agreement by banks to place caps on deposits and lending rates or if he would push for rate caps to be eliminated, Sanusi said: “We will have to discuss at (the) Bankers’ Committee. What I would like to do is to see if we can have on how using purely market-based solutions (can bring) interest rates down.” When asked his timetable for restoring a fully liberalised exchange rate regime, Sanusi responded: “I don’t want to say at the moment. The central bank (under Prof. Soludo) has said three months. I believe we should do it earlier, but I can’t say when.” When asked if there would be more consolidation in the sector as the extent of the losses at some banks became known, Sanusi quipped: “That’s my feeling, that there would be consolidation; that’s what I think. The italicised words clearly indicate that the full import of his intentions were yet to be fully analysed. If then the CBN is passing off the interview as evidence of the existence of a blueprint then we are in more serious trouble than can be imagined! Majority of Nigerians initially dismissed accusatory advertorials published by the likes of Renaissance Professionals as sour grapes. But it’s now obvious that such groups have been gaining new converts everyday as more and more people reason that it is better to focus on the message and not the messenger. It’s very possible that such groups are heavily funded and promoted by individuals that have an axe to grind with Sanusi over the banking reform programme. But, honestly, I’m all for it if it would help to keep the CBN on its toes. This kind of articulated alternative view is what is seriously lacking on the political front. Little wonder, therefore, that PDP – the self-styled largest political party in Africa – continues to loom larger than life and the nation continues to wobble and fumble with a highly inebriated leadership. Perhaps, we should ask the Renaissance Professionals to teach opposition party politicians one or two ‘trade secrets.’ What do you think?