Selling The Banks

ADMIN

THE Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi seems finally set to sell the seven banks ‘rescued’ last year. At a forum in London, penultimate week, he not only announced a definite timetable of between September and October for their sale, but actually went as far as suggesting that the bids for the banks would close mid-July, 2010, in spite of the fact that the issue relating to the sale of the banks is currently sub judice.  Much unlike his earlier hard-line posture to sell banks to foreigners, however, he hinted at the possibility of some local investors being in competition in the planned sale of the banks.

We must continue to put on record our dismay at the continuing arbitrariness on the part of the CBN Governor. Contrary to the posturing by Sanusi, we are not aware that the existing issues of ownership of the banks have been resolved, neither are we aware of any framework being put in place to accommodate existing shareholders under the deal that he, Sanusi, is ever so eager to conclude.

It seems to us that the apex bank may have taken on awesome powers beyond the intendment of the law powers to decree life and death and to expropriate and alienate entities belonging to others. We are particularly disturbed by the fact that the CBN Governor has done practically everything under the sun, including, unfortunately, de-marketing the banks, to make his pet project a fait accompli.

It is not our intention to go into the needless obfuscation of the issues on both sides - the CBN on one side, and the victims (the owners and the former bank directors/shareholders), on the other. Certain facts, however, remain undisputed ─ the fact of mismanagement by the executive managements of the banks, which necessitated the injection of a record N620 billion bailout by the apex bank ─ is indisputable. This figure actually exceeds the combined shareholders funds of the banks this is something that the CBN latches on to as evidence that the banks are effectively in government hands, hence its rights to sell! 

However, it is noteworthy that the CBN never claimed it was nationalizing, or has nationalized, the banks. This point is important because the much information that the apex bank gave on its intervention was that it was necessitated by the need to protect innocent depositors, and to deal with the abhorrent behaviors of the operators.  We can understand the arguable measure of removing the executive managements of the banks (some were actually arraigned in the courts to answer to criminal charges) because, as has been argued, leaving them to continue would have amounted to licensing bad corporate behavior.

We cannot say the same of the unblushing back-door appropriation and brazen expropriation of the banks that the CBN seems to have permitted itself.  In our view, the undemocratic and authoritarian show of power by the apex bank leadership (in a civilian dispensation) amounts to a fundamental breach of the law and of the banks' shareholders' rights enshrined in the law. How can anyone even begin to defend the excision of the rights of the hundreds of thousands of innocent shareholders (the legal owners of the banks) who were in no way complicit in running the banks down, and who are not availed the option of recapitalizing their banks despite their protestations?

Of greater worry is that the CBN seems to have found a pastime in de-marketing the banks as it shops for buyers, with the consequence of further erosion of confidence in an already battered financial services sector. This naturally gives rise to the question as to whose interests are Sanusi and the CBN serving.

Even the very idea of selling the banks to foreigners (doubtless from certain preferred parts of the world, using other parts as fronts) in the guise of injecting technical efficiency into their operations, appears to us as unpatriotic and myopic. Apart from adding fuel to the lingering suspicion about some hidden agenda being hatched by Sanusi, the proposal misses the crucial point that the banks did not run into troubled waters because Nigerians ran them, but because the same CBN, the regulator of the banks, slept while the operators had a field day wreaking havoc on the financial system.

The questions we must ask Sanusi as he plans to sell the banks to foreigners are legion: Have bank failures respected geographical boundaries, given that banks in Europe and America also experienced their own fair share of crisis? Why should anyone suffer the illusion that foreign ownership is a guarantee that the banks would not run into troubled waters? If there are no good bankers in Nigeria, shouldn't Sanusi begin to think of selling the CBN to foreigners? Not a few Nigerians also want to know who these prospective eager buyers of our banks are.

They also itch to know the economic rationale for selling to foreigners banks into which the Federal Government, via the CBN, has sunk about N620 billion bailout funds and which banks the same CBN only recently reported were beginning to make profits. Many right-thinking Nigerians have also begun to ask whether CBN governor Lamido Sanusi is aware of the potential instability and uncertainty which his policies will generate, and are, in fact, beginning to generate, in the financial and other sectors of the economy.

 If the banks are as irredeemably bankrupt as Sanusi would have Nigerians believe, what is the moral in inviting foreign buyers to buy pigs in a poke? And will the foreign buyers subsequently return the banks to Nigeria when life returns to them? If not, would their sale not amount to perpetual economic imperialism and a certain re-colonization of Nigeria?

As far as we are concerned, what the banks need is recapitalization in line with CBN requirements. Fairness and equity obviously dictate that nothing should be done to tamper with the rights of the existing shareholders. They should be encouraged to recapitalize their banks even if that does not preclude the rights of other groups that might be interested in having a stake. Fair must be seen to be fair at all times.