Last week the Central Bank of Nigeria (CBN), once again came to the rescue of one of Nigeria’s strategically important bank. The action of the CBN demonstrates that all is not well with the Nigerian banking system. It is too soon after consolidation for the banking industry to be in distress. This is more so when a bank the CBN has designated as Domestic Systematically Important Bank (SIB) with significant interconnectedness is involved in the saga.
CBN on Monday last week sacked the Managing Director and 11 directors of Skye Bank including the Chairman of the board. In the same vein, the CBN announced the appointment of Mr. M.K Ahmad and Mr. Tokunbo Abiru as the new Chairman and Chief Executive of the Bank respectively. The directors of Skye Bank that were sacked include three executive directors and seven non-executive directors. The executive directors are Mrs. Amaka Onwughalu, Deputy Managing Director; Mr. Dotun Adeniyi and Mrs Ibiye Ekong. The non-executive directors are Mr. Victor Adenigbagbe, Dr. Jason Fadeyi, Mr. Babajide Agbabiaka, Mr. Victor Odozi, Mr. Kunle Aluko, Mr. Abdul Bello and Mrs. Ammuna Lawan Ali.
Nigerians may recall that Skye Bank Plc is a product of the merger of five legacy banks as a result of the banking industry consolidation and recapitalisation exercise of 2005. The legacy banks were Prudent Bank Plc, EIB International Plc, Bond Bank Limited, Reliance Bank Limited and Co-operative Bank Plc. In 2014, in its continuous quest to provide better customer experience, Skye Bank won the bid to acquire the 100 per cent ownership stake of Asset Management Corporation of Nigeria (AMCON) in Mainstreet Bank Limited, a deal which made Skye Bank one of the top four banks in Nigeria.
Looking at the current problem of the bank, its acquisition of Mainstreet bank at a price far higher than the value experts placed on the bank was one of Skye bank undoing. Secondly Skye Bank management may have in the course of business hurt Lagos state power that be to have denied it access to its funds. Lagos state internally generated revenue alone can sustain the liquidity needs of Skye Bank.
If the CBN appointed management is to make a head way in resolving the banks current liquidity problem they must look beyond the financial status of the bank and mend fences with the various interest group that constitute the shareholding of the bank.
The Directors of Skye Bank came from the various legacy banks which ownership cut across the South West geopolitical zone. The solution to the problem of Skye Bank lies in the reconciliation of these interest groups.
Secondly Skye bank’s directors were said to be involved in insider-related credits that are non-performing. Instead of those involved in this reckless act to make good their indebtedness to the bank, when they got wind of the CBN action, purportedly resigned their appointments. How will Skye Bank meet the capital requirement of the Central Bank of Nigeria (CBN) when some directors owe it to the detriment of the already rising Non Performing Loans (NPLs)?
Tunde Ayeni, a former chairman of the bank borrowed a total of N237 billion: Jason Fadeyi, N90 billion: Jide Omokere, N70 billion: Deji Tinubu, N20 billion. This makes a total loan of N412 billion. The N412 billion director’s loans are 59.34 of the total loans and advances in the balance sheet.
The irony is that the CBN accepted their resignation. Why should these men be allowed to go free? The expectation is that the CBN would have called in the Economic and Financial Crimes Commission’s operatives to take hold of these debtor directors. The CBN has as one of its criteria for appointing directors to a bank; a fit and proper person. The question Nigerians should find answers to is; who is a fit and proper person to be appointed as a bank director?
In Nigeria, character traits do not matter any more. What is important is who has deep pockets. If proper investigation is carried out, Nigerians will find that most of the men on the boards and management of Nigerian banks are born crooks and criminals.
What is very disturbing in the whole exercise is the mere fact that the Managing Director and the top management of Skye Bank of Nigeria resigned in anticipation of the planned dissolution of the board and management cadres by the Central Bank of Nigeria which had discreetly worked on removing directors of banks that have demonstrated a level of distress in the last few months.
All the non-executive directors of the bank also resigned in anticipation of a clampdown by the CBN. Where else can this happen? In any civilised and disciplined society, these men will be called to account for their stewardship. If the monetary authority is not doing so, the shareholders whose fund they have squandered should rise to the occasion and take up the challenge of petitioning the EFCC over the recklessness of these directors.
For some time now, Skye Bank has had issues with liquidity and low capital ratio. The CBN had given the management ample time to raise its capital base and improve its liquidity position but the bank failed to do so perhaps because of the current economic situation in the country and the difficulty of accessing funds from international financial markets.
In general terms, the banking industry in recent times, has been gripped with scarcity of funds, with some banks relying on loans from the CBN to fund their operations. Borrowing from CBN, through its Standing Lending Facility (SLF) has skyrocketed by 230 per cent to N929 billion suggesting that Sky Bank is not the only bank in the liquidity trap. It is unfortunate that Skye Bank has to be the guinea pig this time around.
While announcing the reconstitution of the board of Skye Bank Plc, CBN Governor, Mr. Godwin Emefiele confirmed that the bank has been a regular customer of its lending facility, indicating deterioration of the financial condition of the bank. Speaking at a Press conference in Lagos, Emefiele said that the reconstitution of the board of the bank was due to persistent decline in the bank’s liquidity ratio and increase in its non-performing loans.
He said, “These proactive moves have become unavoidable in view of the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN Lending Window. In particular, Skye Bank’s Liquidity and Non-performing loan Ratios have been below and above the required thresholds, respectively, for quite a while.
“To correct the anomalies in the bank, the CBN had several meetings with the management and board of Skye Bank as part of our strategy of close engagement whenever a bank’s financial or governance situation poses potential threats to the overall stability of our financial system.
Despite the expectation of relevant regulators, market watchers, financial analysts and interested stakeholders that Skye Bank should be doing much better than it is right now, we have seen about the opposite in reality. “Given the aforementioned issues and the fact that Skye Bank is a Domestic Systematically Important Bank (SIB) with significant interconnectedness, the CBN would be failing in its duties if it does not take immediate action to nip the steadily declining health of the bank in the bud and correct the situation.
“In view of the long grace period allowed the bank to correct the situation, we came to the conclusion that, although the existing board had done its best to steer the ship, it had come to a realisation that it would be unable to bring the bank out of its present precarious situation. Fortunately, and in the overall interest of the bank, the Chairman and some board members have decided to resign their appointments from the bank.
“Consequently, by virtue of the powers vested in the Governor of the CBN, we have decided to reconstitute the Board and Management of the bank, and appoint new members with the sole responsibility of ensuring the speedy restoration of the health of the bank.
“To this effect, the Chairman of the Board, all other Non-Executive Directors, the Independent Director, the Managing Director, the Deputy Managing Director and two longest serving Executive Directors have voluntarily resigned their appointments with immediate effect. In their place, we have selected industry experts and people of high integrity whom we believe can turn the bank around. In this regard, we have selected Alhaji M. K. Ahmad to be the new Chairman while Mr. Adetokunbo Abiru would be the new Managing Director. The more recent executive directors will be allowed to remain to ensure continuity and a smooth transition”.
CBN’s timely intervention is commendable but it should have done more by ensuring that the directors involved in insider loan abuse are brought to book. It is by so doing that others will learn that it cannot be business as usual. If the apex bank wants its mission in Skye Bank to succeed it must attempt to get the new board reconcile the various interest group in the Skye Bank marriage for the bank to succeed.