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Sanusi’s Financial Gerrymandering [Opinion]

By on August 27, 2011

Editor’s note: This guest post is written by Chudi Offodile, a lawyer and former member of the House of Representatives

When Elbridge Gerry was Governor of Massachusetts, USA, in 1812, the State legislature divided Essex County into two districts with borders so drawn as to give the maximum advantage to the Republican Party. On a map, one of the districts, with penciled additions, looked like the amphibian, salamander giving rise to the expression ‘to gerrymander’.

This is clearly distinguishable from a genuine reorganization of electoral districts which is sometimes essential to ensure that every Parliamentary representative speaks for approximately the same number of voters, known as redistribution.

The salamander is a mythical creature believed to live in fire and delight in it. This is a fitting description of someone we all know who gave his conquered Banks guidelines and a timeline to recapitalize and then proceeded with gusto to violate his own rules. Mallam Sanusi Lamido Sanusi was appointed Governor of the Central Bank of Nigeria (CBN) on the 3rd of June, 2009. Barely two months after, citing audit reports not made available to anyone but himself, he sacked the management of five Banks, Union Bank, Intercontinental Bank, Oceanic Bank, Finbank and Afribank Plc.

Banking sector experts and others in the know agree that the five Banks had serious liquidity problems but that the method employed by the CBN Governor was wrong. Indeed, Sanusi at a press conference he addressed after the sacking of the management of the five Banks said: ‘As at June 4, 2009, when I assumed office as the Governor of CBN, the total amount outstanding at the Expanded Discount Window (EDW) was 256.571 billion naira, most of which was owed by the five Banks. A review of the activity in the EDW showed that four Banks had been almost permanently locked in as borrowers and were clearly unable to repay their obligations. A fifth Bank had been a very frequent borrower when its profile ordinarily should have placed it among the net placers of funds in the market’.

Sanusi was right. Whatever was contained in the audit reports merely reinforced what he already knew by merely studying the activities of the Banks in the EDW. At least, we had an identifiable even if not exactly verifiable grounds for the takeover of the five Banks. The high profile arrests made after the takeover, the sordid details of corrupt practices in the Banks, the controversial publication of the list of the Bank debtors, engaged the attention of a shocked and bewildered populace when Sanusi, this time on the instruction of the President at the time, late President Umaru Yar’adua pounced on another set of Banks.

Dateline October 2, 2009. On that day, Sanusi sacked the management of Equitorial Trust Bank owned by Mike Adenuga, Banks PHB and Spring Bank Plc. The reasons he adduced were somewhat illogical. This time the CBN Governor was no longer coherent. He cited violation of corporate governance rules, corruption and made sundry allegations against the sacked management. As events unfolded it was clear that Sanusi was not going to be hard on ETB. He merely added ETB to confuse the public. His target was Bank PHB. Francis Atuche, erstwhile Managing Director of Bank PHB had neutralized the Yar’adua family and Habib Bank of Pakistan during the merger/consolidation exercise with the ownership structure revolving around Francis Atuche, post consolidation.

Prior to the takeover, Bank PHB had acquired 53% of Spring Bank on the floor of the Nigerian Stock Exchange and had seconded some of its staffers to take over the management of Spring Bank with the approval of CBN and other regulatory agencies with a view to turning around the Bank. Prior to the acquisition, Spring Bank and Wema Bank were under CBN appointed management. Spring Bank became a collateral victim of Sanusi’s premeditated assault on Bank PHB. Both Banks had become organically linked in an intricate Siamese structure, raising the question; whether Sanusi could have taken Bank PHB without Spring Bank.

The question posed above is important because on that same October 2, 2009, Sanusi had given the ‘untouchable’ Unity Bank and Wema Bank up to June, 30, 2010 to recapitalize. Assuming that Spring Bank was in a precarious financial health, which was not the case, why was the extension accorded Unity Bank and Wema Bank not extended to Spring Bank. Afterall, the three Banks share similar historical antecedents and were owned originally by the Governments of the defunct Northern Nigeria, Western Nigeria and Eastern Nigeria respectively. By employing questionable and discriminatory standards to determine the solvency or otherwise of Banks of similar affinity, Sanusi commenced a process of financial gerrymandering leaving a trail of sustained chaos in Nigeria’s Banking industry.

African Continental Bank was founded by the late Dr. Nnamdi Azikiwe, Premier of Eastern Nigeria and later Governor General and then Ceremonial President of Nigeria. The Bank was pivotal in the development strides of the defunct Eastern Nigeria. After the tragic civil war of 1967 – 1970, the Bank under the late Chief Collins Obih as managing Director, was the engine that revived the Igbo economy after a disastrous Civil war and a punitive economic policy that ensured that every adult Igbo no matter how much he had in any account was worth twenty pounds only.

The ACB after all manner of transmutations ended up as Spring Bank.
I was ‘lured’ into investing in the rebranded ACB International Bank Plc (ACB) by Diamond Bank, which in conjunction with the defunct Hallmark Bank and Citizens Bank had formed a 3-Bank consortium to reposition ACB. This was in 2001. Ten years after, having earned no dividend with no capital appreciation, I am expected to accept a whimsical termination of my investment by a regulator who was also the manager.

The CBN was the judge, the jury and the executioner.
To begin with, just as the EFCC Chairman, Farida Waziri, relocated to Lagos and hounded into detention the erstwhile Managing Directors of the eight Banks in August and October 2009, the tenure of the CBN appointed Management 2009 – 2011 must be subjected to very intensive investigation. There are serious allegations of corrupt practices by the CBN appointed management. The CBN therefore cannot revoke the Banking licence of the so called rescued Banks on account of its own failure.

The CBN supervised and managed the Banks and was also the regulator from august 2009. Since the CBN cannot be a judge in its own case, the economic management team recently put together by the President is confronted with its very first assignment: a comprehensive review of the forceful take over of the eight banks by the CBN and the ugly aftermath; nationalization.

The National Assembly is also called upon to investigate the activities of the CBN and the management committee it put in place in the various Banks to ensure compliance with extant laws, including the allegation that the managing directors and executive directors appointed by CBN may have squandered the bail out funds pumped into the Banks by the CBN.

The Islamic Scholar who argues that Christianity is opposed to ‘usury’ as much as Islam, allowed a private Company walk away with a profit of 15 billion naira in one transaction. Property belonging to a government agency (NITEL) was sold to a private Company who now resold it to yet another government agency (CBN). Haba Sanusi!

By the time Sanusi took office as Governor of the Central Bank of Nigeria, by his own admission, the total indebtedness of all the Banks to the CBN through the expanded discount window was approximately 240 billion Naira. These were loans voluntarily taken by the Banks. He conducted a special examination of the Banks within just two months on the basis of which he sacked the management of eight of the Banks. He decided on his own to ‘lend’ 620 billion Naira to these rescued Banks. The Banks did not ask for the money.
The treasury obviously could not accommodate that; so Sanusi simply printed the money. Out of desperation to recover the money he unilaterally invested in the rescued Banks, he suddenly announced that the three Banks he nationalized had repaid the 180 billion lent to them. If they could repay the money why revoke their licence and nationalize them.

Those in the know believe that what is going on is what is called book entry. Somebody somewhere is taking Nigerians for a ride. The more CBN intervenes the more the hole deepens. Apart from the 620 billion naira invested in the rescued Banks by Sanusi, he also set aside 500 billion naira for Small and Medium Enterprises, 200 billion naira for the Textiles Industry and 100 billion naira for the Aviation Sector, a total of about 1.4 trillion naira ‘appropriated’ by one man. This ridicules the institution of the Presidency and the National Assembly and makes a mockery of our constitutional democracy.

The decision to nationalize publicly quoted companies by the CBN and its surrogate hirelings, the National Deposit Insurance Corporation (NDIC) and the Asset Management Corporation of Nigeria (AMCON) require not just judicial review but a public enquiry to reassure the investing public, foreign and local that the action was legitimate and was done in good faith. The confidence of the investing public has been shaken by allegations of corruption against the CBN, the shady deals called transaction implementation agreements and Sanusi’s penchant for violating his own rules.

Back to Spring Bank Plc. Sanusi nationalized Spring Bank and gave it a new name Enterprise Bank. This is forceful acquisition of private property, a slap in the face of the people of South East Nigeria and will be vigorously challenged in the days ahead. This dance on the grave of the great Zik will not stand. Insha Allah!