By Adekunle Ajiboye
The Central Bank of Nigeria (CBN) shares, though as guide as well as a watchman, the Nigerian Monetary universe with Banks particularly Commercial Banks, who also play a key role in upholding the latter’s objective of promoting a sound financial system in Nigeria. The most prominent functions of commercial banks are accepting deposits from the public and granting of loans; so in simple parlance, the monies in the vaults of banks are essentially monies deposited by bank customers and profits made on them.
it is also germane to state that the stability of any financial institutions is closely tied to the continued patronage of money deposits made by customers. These funds must be kept safe. To emphasize that this responsibility falls on both the CBN and Banks is a moot point. Nevertheless, whilst the CBN routinely exercises its supervisory powers through surveillance and examination of commercial banks, the Apex bank also discourages untoward monetary behaviors by banks through periodic dissemination of policies and guidance notes urging, and sometimes mandating excellent corporate governance habits and agile risk management reactions from bank. The banks, in a bid to ensure they operate within prevailing laws and regulations, formulate and adopt internal policies to ensure enterprise risk management and also avert corporate governance malfunctions and failures.
However, a recently released banking industry report by Agusto & Co showed that about 10.9 per cent of the loan book in the banking industry, representing ₦1.5trillion, was already impaired as at December 2018. The figure represents 15 per cent increase in non-performing loans (NPL), when juxtaposed to the N1.3 trillion posted in the industry in 2017. As a defence, it has been suggested that Nigerian banks have the burden of carrying large portfolios of NPL dollar-denominated loans mostly granted to the oil and gas, telecoms and power sectors just as it is equally germane to note that such loans had ultimately weakened the banks’ foreign currency liquidity positions. Another germane position is that the rise of NPL is as a result of the last economic recession which most companies have not recovered from, particularly in the area of the foreign exchange crisis.
Even so, and regardless of the foregoing economic rationales, the culpability of most commercial banks through their leadership is a major contributory factor to this financial brigandage. The existing risk management policies and processes and corporate governance codes in Nigeria Banks when juxtaposed with state of non-performing loans in commercial banks are a hoax and cosmetic lining to please regulators during examination.
It is on this note that one must fully align with the position of the Managing Director of Highcap Securities Ltd, Imafidon Adonri, when he said “The thing about bankers is that they lend aimlessly. My fear is that the supervision of the banks appears to be weak because if they follow the rules of supervision tenaciously, there is no way they can accumulate such huge unpaid loans”.
Whichever way, you analyze this issue, the impact affects the monetary system, the negative brunt is felt and borne deeper by the customers and shareholders because such banks evidently shall be incapable of paying out dividends, enable new or increased borrowing and even declare commensurate and respectable profit. It is highly vexatious and relentlessly frustrating when one observes that popular, well managed, reputable and respected financial institutions 20 years down the line are culprits in this malfeasance. Infact in some cases, they even constitute worse spectacles then new players in the field. It a common credit principle that loan are not granted based on an helicopter view, but subject to layers of in-house expert reviews and series of hierarchical approvals hence failure of such loans are not borne out professional negligence but as experience has shown due to executive management cum board overbearing interference and approvals, deliberately short of risk management principles and measures.
Nigerians can ill afford another banking crises or failure, unfortunately, this position is not far away given available statistics and the fondness for corruption by the cats that are watching the meat in our financial institutions. The Nigerian on the streets will not accept 50,00.00 (fifty thousand Naira) as insurance for his hard earned. The reprisal against such banks would be catastrophic. The CBN must raise the bar during bank examination. For example, the names of bank executives appending their approval to loans that repeatedly go bad must be compiled, analysed and appropriate sanctions meted . Not treated as coincidences. The number of Bank executives competing with the Nigerian politicians in terms of money laundering is at an all- time high.
Where the expertise for this type of examination is not available, the CBN should engage local anti- money laundering firms to carry out special investigations on financial institutions, As at today, several senior management staff are in “conflict situations, whereas their bosses benefit unethically and illegally benefitting from their positions through approvals to open doors for outright stealing. They live in fear for what repercussions their acquiesce may cause when subjected to any investigations especially when the culprit exits the institution. These minority of unethical bankers have massively benefitted from insider dealings and subversion of internal policies to the extent that they will “match” most corrupt Nigerian politicians Naira for Naira and Dollar for Dollar.
At a time not far off, Mallam Sanusi Lamido Lamido, a former CBN governor, spearheaded a policy that saw CBN examiners barred from accepting breakfast, lunch and dinner or other relaxation packages offered from the Banks undergoing examination. This position, regardless of the existing CBN circular, does not hold water any more.
Examiners must be properly be schooled on ethics and client relationships. It must be clear that while examining banks, it is patently decadent to start seeking “connections” for employment opportunities for self or relations.
The Bank customer 20 years ago is not the same as the one today. An outstanding characteristic of the present customer is that he is aware of his rights. The relationship between Banks and customers is very sour and tense. Banks stealing from customers must be stopped and openly cautioned.
Fortunately, the CBN possesses in its arsenal, a variety of sanctions that are proportionate and dissuasive. No culprit anywhere must be shielded. Banking examination and supervision must mean something.
It is time to clean the stable.
Adekunle Ajiboye, is a lawyer and financial risk expert