Banks: The beaming of red eyes from all angles
By Enitar Ugwu

IN Nigeria, as in all parts of the world, when the word bank is dropped, money, lots of it, readily comes to mind. This is because a bank is about the only house where money is the sole occupant. Investors, governments, con men and armed bandits are all interested in the happenings inside the bank. For another reason, banks' activities in most cases dictate the direction of a country's economy. In Nigeria, since the conclusion of the first phase of the consolidation exercise, things have been on the upbeat, with the belief that with N25 billion or more in their kitty, the banking public can go to sleep with their eyes closed. The closing of eyes is an essential exercise for the Nigerian banking populace judging by the past occurrences of banks collapse in the nation's financial system. Even though the financial regulatory are putting all energy to forestall any lapse that might lead to another round of bank's distress, recent happenings in the system in some banks have started to raise concern.
Presidential probe in the offing
As exclusively reported by The Guardian on Monday, the Presidency is currently being in inundated with patrons from investors on the conducts of banks. Not only are their corporate governance credentials being called to question, posers are being raised on the personal conducts of some of executives. Information at the disposal of The Guardian shows that their petitions were woven around banks' involvement in unethical practices such as
• laundering of money for public officers; involvement in round tripping;
• buying of private jets by banks' big wigs;
• accessing of bank loans for share buying.
According to Presidency sources, the life style of bank executives has compelled shareholders to inundate the government with complaints and questions on what regulatory authorities are doing to verify whether some of the funds are from the executive’s private funds or shareholders deposits. If shareholders' funds had been used, with whose approval? Some of the banks are saying that the private jets are not their private property. One, for instance, informed The Guardian that the private jet is the property of his bank's asset management company. However, what is not clear is whether their acquisition had the approval of the banks' shareholders. Even at that, the cost of the jets and mode of buying are unclear. Even the operational style of some of the banks has reportedly drawn the ire of the National Economic Intelligence (NEI) in addition to their handling of military pension fund. The President is said to have referred the cases to the Central Bank of Nigeria (CBN). It was also gather that the Economic and Financial Crimes Commission (EFCC) may be asked to look into some of these allegations such as bank' involvement in money laundering for governors.
The CBN and other financial regulatory authorities such as the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) may also have been asked to look at bank's share purchases with a view to unravelling how some of their directors came about the huge funds they used in buying those shares. This scam has allegedly became rampant at this latter stage fund raising from the capital market by banks, owing to the CBN's resolve to slow down on funds verification exercise. Only last week, the Nigerian Deposit Insurance Corporation (NDIC) in Kaduna raised eyebrow over the frequent high rating of banks in the country by some local and international organisations. The Managing Director and Chief Executive Officer, NDIC, Mr. Ganiyu Ogunleye, who debunked the ratings of the banks, pointed out that they did not correspond with the indices in the possession of NDIC. He wondered where the banks and the organisation conferring the high ratings obtained their statistics. Ogunleye noted that it had become a phenomenon for the banks to award themselves such titles as "the biggest", "the most consolidated", "the one with the largest shareholders funds" etc, pointing out that competition for size is becoming worrisome.
He expressed dismay that in spite of the challenges posed by post-consolidation regime in the banking sector, Chief Executive Officers (CEOs) of banks had not yet realised the consequences of the targets allocated to them. He said NDIC would want the CEOs to run the banking businesses in a safe and sound manner. "Value creation has to go with the interest of shareholders and depositors," he warned. He went ahead to draw a parallel between Nigerian banks and the City Bank of the United States, noting that the size of the bank had over 40 examiners but when the CEO was not measuring up to the expectations, he was asked to step aside
Parliamentary outrage
Also members of the House of Representative last week ordered a probe into the activities of banks over what they described as fraudulent practices within the banking sector. They said banks were feeding fat on Nigerians by holding on to oversubscribed funds longer that six months, "round-tripping" with people money and going to the capital market every six months to raise money, when they were not adding to the growth of the real sector. In a motion brought on the floor under matters of urgent national importance by the Chairman, House Committee on Market, Mr. Ahmed Wadada, from Nasarawa State, claimed that banks exploited Nigerians to the detriment of the nation's economy. He pleaded with the House to mandate an investigation into the activities of banks in the country and also take actions to suspend operations of banks that were involved in sharp practices.
He said, "we all know what happened during the recent bank consolidation by the Central Bank. We are aware how banks ran frantically to raise money to meet the N25 billion recapitalisation. They tell us that they are strong banks, but we saw the deception that took place. "We notice that instead of banks to give out money for the development of the real sector, they are busy circulating shareholder's money by way of round tripping, among themselves. "All these banks, even when their shares have been oversubscribed. Hold on to this money longer than the stipulated three months. They deprive Nigerians of their money and instead make profit with it. "The banks have become importers and exporters declaring unproven profits and using depositors' money to make profit (for themselves) instead of the depositors. This situation is unethical, unacceptable and fraudulent".
During contributions by members, Mr. Igo Aguma from Rivers State said, "what the banks are doing is 419". "They are obtaining money from Nigerians by false pretence. We should never allow this to continue because they are unfair to us, to the economy and for our image". Other contributors were Sani Abdul, Ahmed Salik and Emmanuel Bello, among others. Only Mr. Positive Ihiabe from Kogi spoke against the motion mandating the House Committees on Capital Market and Banking and Currency to conduct an investigation into the matter and report back one month after the house resumes from its Christmas break. He also mandated the joint committee to invite SEC, the NDIC, all the banks involved and other stakeholders during the investigative hearing. The lawmakers ordered that all share certificates should be issued to their owners within three months from the day of close of public offers and that banks should refund, with interest, all monies deposited for shares not issued after six months. Also, the House of Representatives passed a motion mandating the House Committee on Finance to Conduct a holistic investigation into the non-remittance of revenues by certain government agencies and parastatals into the federation account.

Culled from the Nigerian Guardian.

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