Audit Report that Exposed the Rot in the Banking Sector

Many people did not actually know the gory details of how the sacked chief executives of the eight banks ruined their banks, if not for providence that saw the emergence of Mallam Sanusi Lamido Sanusi, the banks would have become failed banks with the poor depositors going home with a maximum of N200, 000, irrespective of the amount of deposits they have in the banks,while the bank thieves that ruined the banks will be enjoying their loots, possibly in a foreign land.
 
Following the auditing of the 24 banks, ten in the first batch and 14 in the second and final batch, the reports showed gross abuse by the disgraced banks’ chief executives, reckless use of depositors fund, poor corporate governance, share price manipulation, insider loans many of which later become toxic etc.
 
The audit reports showed the sacked CEOs setting up Special Purpose Vehicles to lend money to themselves for stock price manipulation or the purchase of estates all over the world.
 
One bank borrowed money and purchased a private jet which was later discovered registered in the name of the CEO’s son.
 
In another bank, the management set up 100 fake companies for the purpose of perpetrating fraud.
 
It was also discovered that a lot of the capital supposedly raised by these so called “mega banks” was bubble capital financed from depositors’ funds. For example, in the report, 30% of the share capital of Intercontinental Bank was purchased with customer deposits.
 
Afribank used depositors’ funds to purchase 80% of its IPO. It paid N25 per share when the shares were trading at N11 on the NSE and these shares later collapsed to under N3. The CEO of Oceanic bank controlled over 35% of the bank through SPVs borrowing customer deposits.
 
This is not alone, the report showed that corporate governance in many banks failed because boards ignored this concept, including being misled by executive management, in obtaining un-secured loans at the expense of depositors and not having the qualifications to enforce good governance on bank management.
 
In addition, the audit process at all banks appeared not to have taken fully into account the rapid deterioration of the economy and hence of the need for aggressive provisioning against risk assets.
 
To prevent the banks from going under, the CBN promptly injected N640 billion, an action that was viewed with mixed feeling by shareholders and directors of these banks
 
The mixed feelings came about when Mallam Sanusi disclosed that the money injected in the eight sick banks was a loan which would be paid back by investors who takes over them
 
This singular statement was diagnosed to mean that the CBN was having an hidden agenda of selling off these banks to Mallam Sanusi’s cronies, particularly when he didn’t ask the existing shareholders to recapitalise their sick banks.
 
However, Mallam Sanusi disclosed that he neither has a northern agenda nor an Islamic agenda, but an agenda to save millions of poor depositors who would have been made to suffer had the sacked chief executives been allowed to kill their banks
 
“The best northern agenda will have been to allow the sick banks to go under so that the north and the south will be in the same situation”.
 
While the shareholders and the directors of these banks condemned Sanusi for attempting to sell these banks through the back door, the National Assembly saw the injection of N640billion as illegal, more so when Sanusi did not make any consultation with them before the injection,
 
Senate Chairman on Banking and Other Financial Institution, Nkechi Nwogu was more vociferous in the attack of the CBN, wondering why the apex bank could use tax payers money in the federation account to bail out the privately owned banks.
To the Senate, this is an Act of appropriation which must pass through the National Assembly for approval.
 
Sanusi was invited by the Senate where the committee attempted to lampoon him for using tax payers money without approval from the National Assembly.
 
In his defence, the CBN governor told the warring senators that the injection was perfectly in order and was part of the apex bank’s mandate of granting loans and other accommodation facilities at such rate of interest and on such terms as the Bank may determine to any bank which may be having liquidity problems.
 
He said” What the Central Bank of Nigeria has done is to engage in the business of banking by given loans to these ailing banks. It is authorized by law to so do. It has not spent money from the Consolidated Revenue Fund of the Federation which must be subject to appropriation by the National Assembly”.

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