The legality of CBN's Action on sick banks

Tongues have been waging on the legality or otherwise of the actions taken by the Governor of the Central Bank of Nigeria [CBN], Mallam Sanusi Lamido Sanusi. In the context of this discourse, it is quite appropriate for us to examine these actions and analyse it in the context of the rules governing the banking sector.
 
The removal of the Chief Executive Officers and some other officers of the affected banks
When the rot was discovered in the sick banks, the first action taken by Mallam Sanusi was to remove the bank chief executives and some other officers of the affected banks. This no doubt caused some misgivings in the industry as many observers observed that the apex bank boss overstepped his boundary by wielding the big stick on the bank chief executives who many seen as the flagship of the banking industry.
 
The debate in this area has been whether the Central Bank of Nigeria has the power by statute to remove any bank official and whether they were accorded fair hearing in this case before they were removed.
 
Some of those that have been outspoken against the actions include the Chairman Ibadan Zone Shareholders Association, Chief Aderemi Oyepeju who said the sacked chief executives were not given fair hearing.
 
One of the shareholders of the banks, Sir Sunny Nwosu said the apex bank erred by appointing chief executives of banks and at the same time fixing their tenure. According to him, these functions are that of the banks board which also determine the salary packages of the bank CEOs appointed
 
A Lagos based lawyer, Festus Keyamo disclosed that though the CBN Act says little about its powers in relation to other banks as it is largely concerned about the various officers and departments of the Central Bank of Nigeria, the Banks and other Financial Institutions Act (BOFIA in short) is very detailed regarding the powers and functions of the Central Bank of Nigeria in relation to other Banks.
 
Without much ado, most of the sections deal with the powers of the Central Bank of Nigeria to look into the affairs of any bank without restrictions and to set rules and regulations regarding their operations. Nobody has argued about these powers.

Section 48(1) & (2) of BOFIA states among others that  every bank shall, before appointing any director or chief executive, seek and obtain the bank’s written approval for the proposed appointment , Keyamo also said that section 11[1][b] confers on the CBN the power to remove or suspend that officer.
 
Citing the case of Okomu Oil Pam Co. Ltd V. Iserhienrhien (2001) 6 NWLR (Part 710) 660,Keyamo disclosed that the Supreme Court ruled that it is  in accord with the general principle that the powers to appoint implies the power to remove, so that even where the power to appoint is silent as to the power to remove, this will be implied”
 
“In this case, it is submitted that the power given by Section 48 of BOFIA to the Central Bank of Nigeria to approve appointments is nothing but the power to also appoint. And by the authorities cited above, the power must also include the power to withdraw the approval or withdraw the appointments’ Keyamo observed.
 
On the issue of giving the sacked bank bosses fair hearing, Keyamo asked rhetorically, Was this a breach of their fundamental right to fair hearing?
He said under section 33, of BOFIA, the Governor shall have power to order “a special examination or investigation before exercising his powers under Section 35”. In order words, the process of looking at the books of the banks is not a radio talk show that is one-sided. An “examination” or “investigation” naturally involves raising questions/issues, clarifying them and probing into their activities.
 
”Now, having carried out the “examination” or “investigation”, what “hearing” is required again from them to take a decision and remove them from office as required by Section 35 of BOFIA? Should Sanusi have asked them what decision he ought to take against them before taking the decision? I think not.” He said.
 
There are also arguments on the appointment of interim executives to run the banks with some saying that it is only the members of the banks, sitting in a general or extra-ordinary general meeting or the Board of Directors that can appoint any person to run the affairs of the affected banks. On this argument Keyamo quoted Section 35(2) (d) of BOFIA that stated that “the CBN has the power to remove from office, with effect from such date as may be set out in the order, any director of the bank; or ) appoint any person or persons as a director or directors of the bank, and provide in order for the person or persons so appointed to be paid by the bank such remunerations as may be set out in the order.”
 
On the involvement of Economic and financial Crimes Commission (EFCC), Keyamo said those who have been condemning the apex bank’s action for referring the sacked bank bosses to the EFCC were only misleading the public.
 
He said both the Central Bank of Nigeria Act and BOFIA lay down strict guidelines to be observed by banks in carrying out their operations, especially in relation to customers and the granting of loans where the offender is liable on conviction to a fine of N100,000 or to imprisonment to a term of three years.
 
Having argued that the acts of the bank officials go beyond mere administrative lapses, but are, also criminal in nature, the lawyer was of the opinion that the EFCC can statutorily prosecute those found wanting.
 
On the injection of fresh capital into the banks without legislative approval, Keyamo submitted that there is nothing wrong with the decision as well as the the invitation extended to Sanusi to appear before the House Committee during the imbroglio.
 
Keyamo argued that notwithstanding the provision of section 9[1][c] and 34 ]d] of this Act, the CBN may grant 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 giving 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.
 
He said if the invitation had been restricted to ask him question regarding his actions, then it would have been proper and correct, stressing that to insist that prior approval of the National Assembly should have been sought is legally preposterous
 
Keyamo and the hordes of legal luminaries that had spoken in favour of the CBN actions seem to be alone in their judgement of the situation, the shareholders cannot still explain why the CBN will usurp their functions in the appointment and determination of tenure of bank chief executives and the directors.
 
Looking at all the issue raised, it is obvious that Mallam Sanusi , whom many loved to hate is in order, however , it is the opinion of many stakeholders that he should have to carry the shareholders of the banks along to avoid some of the criticisms that trailed his policies.

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