[size=18pt]Where's the $7billion Placed in 14 Banks?[/size]

Henry Olujimi Boyo

The report of 14 Nigerian banks which were appointed by the Central Bank of Nigeria as ‘Asset managers’ of Nigeria’s reserves was carried on the back page of The Guardian newspaper of October 5, 2006. Festus Odoko, the CBN’s Head of Corporate Affairs, confirmed in the report that “already, deposits worth $7bn representing part of the CBN’s ‘share of foreign reserves’, presently estimated at about $38bn, had been released to the banking consortium”.

Although Odoko confirmed that the appointment of the 14 banks was ratified by the Investment Committee of the CBN on Tuesday, October 3, 2006, the $7bn had apparently been quickly shared out the next day!

Thus, the CBN made good its promise to invite Nigerian banks with up to $500m consolidated capital base to a ‘foreign reserves banquet’, if they could also provide evidence of existing collaboration with internationally credible financial houses. The Guardian report however failed to clarify if the expected collaboration included management oversight or was simply a formalisation of a glorified foreign correspondent banking arrangement!

“Nonetheless, critics have wondered if 14 banks which laboriously raised their capital base to N25bn could also quickly raise an additional N35bn to meet the $500m benchmark required to manage the CBN’s reserves. On hindsight, it seems the apex bank may have quietly dropped this steep requirement so as to pursue its earlier declared agenda!



“Nigerians are generally unaware that with a stroke of the pen, the CBN committed our country to possibly its largest single venture ever! The question however is, who will benefit from this huge upfront payment for an anticipatory promise to grow our economy with active support from beneficiary banks? Yes, you have got it, the same 14 banks will smile broadly to their overseas partners’ vaults, since these banks recognise that the related cost, if any, of the $7bn largesse will certainly not exceed the usually very modest below three per cent prevailing international yield on such placements!

“Incidentally, the 14 favoured banks are not constrained to restrict application of the $7bn to address our own critical domestic infrastructural deficit, and they are therefore at liberty to invest internationally! It is disturbing, however, that while we go cap in hand in search of foreign exchange inflow from foreign investors, we are, simultaneously inexplicably, exposing our precious $7bn, for minimal or nil return, to a consortium of Nigerian banks which have a consolidated capital base of less than $3bn, without demanding some measure of collateral/audit/managerial control or equity participation. Curiously, the tenure and other details of the Memorandum of Understanding regarding this transfer of our vital asset have not been made public.

It will be foolhardy to expect that the largesse of an uncollateralised $7bn deposit or low interest credit will change the attitude of banks to supporting real sector investments, particularly the significant funding deficit of the SMEs. The bizarre strategy of a minimal return below three per cent on a $7bn ‘placement/investment’ is clearly amplified by the CBN’s willingness to conversely, simultaneously, pay between 12 and 17 per cent interest on funds it borrows from these same banks!

“Nonetheless, even if the 14 banks are willing to repatriate all or part of the $7bn back to the Nigerian capital market, it is not difficult to predict where their interests would lie: yes; the obvious destination would be further patronage of government’s Treasury Bills and bonds on which they can earn returns of up to 17 per cent, even when ultimately, the CBN simply sterilises hundreds of billions of naira it borrows from any socially impactful use. Thus, we may ultimately be paying oppressive interest rates to the same creditors whom we gleefully ‘gifted’ our savings for minimal consideration. This may probably be seen as the ultimate strategy in worst central banking practice!

“Odoko, the CBN mouthpiece, also claimed, in the same Guardian report under reference, that, ‘The $7bn represents the apex bank’s share of Nigeria’s foreign reserves!’ I beg your pardon! Apart from the very lucrative business of substituting naira for federally allocated dollars to build up reserves, what business did the CBN specifically do to earn $7bn? Evidently, Section 162 of the constitution does not distinguish any share of dollar reserves, strictly for the CBN. Our crude oil revenue belongs to the Nigerian people as constituted by the three tiers of government; thus, the National Assembly would have defaulted in their constitutional duties if the CBN is not invited to defend why $7bn of our reserves should be liberally advanced to 14 banks without oversight approval, while we still go cap in hand to beg for external loans!”

The preceding are excerpts from an article titled, “14 Nigerian banks to enjoy $7bn reserve”. The piece was first published in the Vanguard newspaper on October 9, 2006. Not surprisingly, barely two years after Prof. Chukwuma Soludo’s “celebrated” banking consolidation and confident assurances to the National Assembly that Nigerian banks were insulated from the global economic meltdown, most of our banks actually tittered on the verge of collapse. There is yet no confirmation that the 14 banks have repaid the $7bn given away in October 2006 by the CBN before the banking crisis erupted in 2008. Consequently, it is possible that Nigeria’s $7bn reserves may have ultimately “gone with the wind” during the ensuing financial crisis!

Nonetheless, between 2009 and 2010, during Lamido Sanusi’s tenure as the CBN Governor, such probable default still did not stop the banking sector from receiving additional largesse in excess of N5tn ($30bn) liberally created by the CBN and channelled through its surrogate, the Asset Management Corporation of Nigeria as interventions to rescue the banking sector.

Thus, the CBN’s misguided generosity notwithstanding, the banking community has remained resistant to providing the SMEs access to cheap funds to stimulate industrial rejuvenation, economic growth and increase employment opportunities. Incidentally, the CBN’s self-styled “own reserves” subsequently expanded well beyond $40bn to support the apex bank’s sporadic multi-pronged uncoordinated cash interventions to various groups. Paradoxically, soon after AMCON’s interventions, the banking sector bounced back with bountiful profit postings, despite a still largely comatose real sector. Consequently, unemployment, oppressive mass poverty and increasing national debt, unexpectedly have become increasingly burdensome! Ironically, in 2015, the banks also became prime beneficiaries of N600bn bonanza interest charges paid by the CBN for borrowing back excess naira balances which were earlier placed with zero interest by government and agencies in these same banks.

In the light of the severe economic implications of the current forex deficit, it is necessary for the Economic and Financial Crimes Commission to take a closer look at the circumstances and ultimate fate of the CBN’s extraordinary “deposit/loan/placement” of $7bn to 14 banks in 2006. Nigerians surely have a right to know. After all, if the $7bn largesse to banks was a widely reported media affair, one should also expect that the refund or the successful liquidation should have been heralded by a much more “in your face” media blitz to assure Nigerians of the exemplary sectoral competence, so that the wisdom of the CBN’s provision of this facility to the banks in the first place, would be appreciated.

Regrettably, however, despite the $7bn CBN’s largesse and $36bn AMCON interventions, there are indications that with non-performing loans now in excess of the precarious threshold of 50 per cent, the banks may again be in trouble without having fulfilled the public expectations of powering growth of the real sector or promoting the creation of more jobs. Worse still, the CBN may be again compelled to soak up more toxic debts and create fresh cash injections to once more bail out these banks, even when recent history shows that such interventions may fail to recharge the economy.


http://punchng.com/7bn-cbn-placed-14-banks/

@Seun, Myndd44,lalastica
Please help us move it to front-page so people can join the search for the 'missing ' $7billion.
At this critical time, we need this money like kilode.

Watching in 3D....

I wonder why you guys do this to yourselves. What you should be asking is: what part of the billions of USD reserve inherited by this admin and the past admins constitute the $7b? The former CBN governor had made it clear that the money was same as foreign reserve and not a loan, an upfront investment or a largesee as this spin piece wants to make us believe.

Adesiji77:
Watching in 3D....

Banks were given the money at very low interest(if any) and they turn around to give the struggling masses who are real owners of the money at exhorbitant interest rate. The bankers are dormant middlemen who are simply there to compound the problem of the masses to whom the money belongs and the masses deserve to know how they were made to borrow their own money at a high rate.

onomeasike:
@Seun, Myndd44,lalastica
Please help us move it to front-page so people can join the search for the 'missing ' $7billion.
At this critical time, we need this money like kilode.

Please they should shut down these banks immediately especially those ones that have merged or acquired.

I support that "Economic and Financial Crimes Commission to take a closer look at the circumstances and ultimate fate of the CBN’s extraordinary “deposit/loan/placement” of $7bn to 14 banks in 2006." Those merger and acquisition processes would have been used to hide our monies. Useless bankers. Nonsense.

Supported: We need to look for this money. Where is lalasticlala sef

pchukwudi:
I wonder why you guys do this to yourselves. What you should be asking is: what part of the billions of USD reserve inherited by this admin and the past admins constitute the $7b? The former CBN governor had made it clear that the money was same as foreign reserve and not a loan, an upfront investment or a largesee as this spin piece wants to make us believe.

Oga, what's my own now? Does my moniker sound like "Soludo" or "Henry Boyo"?

Ok now...

I honestly wish someone can translate all these banking jargons.

It appears an interesting piece of information.

toor

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Mr Henry, ask google. Anumanu

The Worst and Most Corrupt CBN Governor is Soludo

onomeasike:
@Seun, Myndd44,lalastica
Please help us move it to front-page so people can join the search for the 'missing ' $7billion.
At this critical time, we need this money like kilode.

Lol.

True talk

Adesiji77:


Oga, what's my own now? Does my moniker sound like "Soludo" or "Henry Boyo"?

Dear Customer, please note that AIRTEL will not ask you to disclose your telephony information like SIM serial, PUK or frequently dialed number either via SMS, phone call or email. Kindly disregard such requests. Thank you for choosing Airtel

Ask EFCC

hmmmm

See queshion oooo...

Are the 14 banks no more in existence

Are the beneficiary banks in debts

Abeg Boyo abi Bolo, you should be Asking where are the supposed billions recovered from corrupt polithieficians...

This government is just raising dusts to distract the people of nigeria on the state of the economy. How does all these affect the market price of foodstuffs? it is even causing more capital flight and inflation and depression.

They have stolen in the past but please give us good governance.

Money don enter voice mail since na, nor be today,patapata na court e go end and the judgement will obviously be bought by the highest bidder.

2 people closing in on Soludo. Henry Boyo and Femi Falana. I hope this is not targeted to IPOB people. I remember Soludo asking for release of Kanu. why is it that this government does not like opposition?

Gej took all the money according to apc zombies and also yoruba muslims.

SamuelAnyawu:
The Worst and Most Corrupt CBN Governor is Soludo

Taaa! Stop that nonsense

Biddypearl:
toor

is that all wat u can say with all wat is going on in Nigeria

But seriously, why can't honesty come out from that side?

same thing with the former finance minister who spear headed treasury looting with all her phD and Harvard.. yet her pple will come here to condemn d present one painting d former as responsible.

It's a very bad omen honestly.. are these d kind of pple that want to rule Nigeria? I laff