“WE SAW IT COMING, DIDN’T WE”? PIGGY BANKS, CENTRAL BANK AND A DYSFUNCTIONAL GOVERNMENT: PART 1
The recent banking tsunami comes to me at no surprise. It was long overdue. The sweep of bank executives, name dropping of debtors and the attendant backlash from the public all the more reminds us we are in Nigeria.
What surprises me though is the extent at which the CBN has reacted. It acted as if it is at war with the entire banking sector including corporate Nigeria and its cohorts. Are his actions not riddled with sentiments and highhandedness? Could he not have handled this better and within the confines of the law? I pondered as I read the pages of a major Newspaper on the news of the sack of the management of the 5 banks.
As my curiosity aroused I wondered if he ever considered the following;What major steps are the management of the Banks taking to reverse their predicaments? How does the sacking of bank chiefs without notice affect the confidence of foreign investors in our policy making? How will they perceive doing business in Nigeria? What happens to letters of credit already given by these banks? What about job losses and the impact on an already sky rocketing inflation? What about the stock market and bearish ride, will it finally crash? What happens to our pension funds? How has bad governance contributed to this?
When we had a similar crisis in the west last fall, we saw how their Central Banks responded. Did you ever see names of debtor’s in the newspapers? Did you hear their CBN Governor’s naming names? Those that defaulted on the subprime mortgage where their names published by their CBN or the banks themselves? Please where is confidentiality in banking? Where is the Senate Committee responsible for Banking in Nigeria or indeed the Senate?
We all saw this coming didn’t we? For years, even before the Soludo era, Banks declared huge profits at the expense of a rapidly declining real sector. The Power sector hit a downward spiral, refineries still did not work, and our roads became more and more inaccessible. The employment rate grew worse even as our banks employed more, oil production declined slowly as Niger Delta militants increasingly showed their prowess in a rare form of militancy that’s never been seen in Nigeria. Infrastructural decay almost turned dust as the FG craved for foreign investments, non-oil exports were slimmer even as oil revenue continued to increase. Our exchange rate suddenly became stable not as result of foreign direct investment or out of an increase in exports but of an increasing oil price that ensured our reserves will grow until we paid off our foreign debts. We saw it coming didn’t we? Real estate prices soared not because of booming mortgage market but by a rapidly increasing purchasing power of the elites further fuelled by corruption and “other people’s money” as they say.
The banks garnered all sorts of awards; Soludo beat his chest as the artificial banking consolidation had been a success. Salaries where increased in the banking sector so much so that bankers leapt from one bank to the other like a prostitute. Suddenly, people could afford new cars as credit flowed. Everybody sold diesel and everyone owned a land somewhere. The Government even cashed in on this by selling properties at exorbitant rates predicated by the overvalued property market. Some of these properties were financed through bank loans fraudulently obtained by the buyers. We saw it coming didn’t we?
The stock market boomed so much even bread sellers could float an IPO without historical records. In fact people even formed their own stock markets and named them such names like “wealth solution and Nonspecto”. People made crazy money suddenly we had a middle class. We even asked our loved ones to come back from abroad that things were getting better. Our “churches” opened more “branches” as tithes and offerings swelled.
Newspapers had more adverts than stories. Obituaries became a show as people doled out hundreds of thousands for their names to appear while the families left behind ponder what become of their lives. Banks took slots on the front, back, inside front pages of newspapers. Even musicians and comedians weren’t left out. They made millions not from their record sales but from shows and sponsorship from banks and telecom. We didn’t see it coming did we? Now the chicken is coming home to roost. We are now screaming and naming names. We have now stigmatized credit. The EFCC is so involved you’d wonder how Tafa and the rest still managed to bounce back.
If there is one thing I have learnt, it is that we haven’t learnt our lessons yet. Why do we always have Bank failures in Nigeria since the advent of capitalism and liberalization? I will attempt to explain that in part two of this write-up.