They say a banking storm is brewing in Nigeria. Last week the Central Bank of Nigeria (CBN) ordered the sack of five heads of banks in Nigeria for financial mismanagement. The affected banks are Intercontinental Banks, Oceanic Bank, Afribank, Finbank, and Union Bank; the CNB had to pump in $2.6 billion into the five banks as bailout money to prevent their collapse from bad debts. What caught my attention is that some of Nigeria’s richest individuals and companies are in the list of more than 200 names.
Last week the Nigerian authorities issued the debtors a five-day ultimatum to pay, or get arrested. Four of the five sacked bank bosses have already been arrested. Yesterday I was listening to the lawyer of the fifth chief executive speak on BBC about his client’s whereabouts; he said his client was abroad seeking medical treatment and has already filed a response to the charges against him. The latest crackdown in the Nigerian bank sector comes on the back of the promise by the new CBN governor, Lamido Sanusi, when he took office two months ago.
The Nigerian banking system is notorious for its cronyism, where bank heads lend money from depositors to family and friends for use in private business for private profits. When the news of the dismissals of the chief executive broke last week, there was the expected general panic among depositors who were planning to withdraw every kobo that they had in the affected banks. Hopefully, the financial intervention by CNB will stabilize the situation and reduce panic and uncertainty among ordinary Nigerians.
Notable among the list of debtors is Alhaji Aliko Dangote, who was rated last year by Forbes magazine as the richest Black African, with a net worth $3.3 billion in 2008. He owes Oceanic Bank $15 million. One can only hope that this crisis would lead to more transparency in the Nigerian banking institution and allow ordinary people to access loan facilities. After all, the bulk of deposits come from ordinary people, not billionaires.
Photo credits: Bloomberg