Home Column Revisiting rescued banks’ grant of waivers to billionaires: What redress is possible?

Revisiting rescued banks’ grant of waivers to billionaires: What redress is possible?

by Business News Report

When in August 2009 Sanusi Lamido Sanusi intervened in five troubled banks in the country; many saw it as a rescue mission. But I saw it differently. I whole-heartedly supported Sanusi cleaning up the toxic assets in the industry. Beyond that, I disapproved of his taking over of some banks that were still liquid at the time of the intervention. Sanusi did not separate the individuals from the institutions. If some of the bank executives contravened the banking rules, the CBN or the law enforcement agencies are at liberty to deal with such individuals. As it happens so often in developed democracies, companies that infringe on regulatory guidelines are fined heavily and in some cases, their chief executives are prosecuted and jailed.

If Sanusi at the time had relieved the chief executives of those banks of their jobs and made them to face the law, he would have been a hero. But he did not stop at removing the chief executives, he went ahead and took over the banks. That was what many did not see that behind the scene, there were unseen hands guiding some of the well-targeted decisions. When some of us saw through what was happening and said so, the country never took our words for certain. One of the very sad things that happened then was waivers granted to billionaires. At the time, the link between Sanusi, Lai Alabi and Bukola Saraki was not so clear to Nigerians. Now that Sanusi Lamido Sanusi has openly acknowledged that Saraki was his classmate, the picture of what happened to the rescued banks is becoming clearer. Now, if Saraki is Sanusi’s close friend and Lai Alabi worked for Saraki, then the connection and the subsequent chain of actions that led to the liquidation of some of the banks is emerging in very clear terms.

For those of us who reported the crisis recall with nostalgia that Intercontinental Bank’s interim management then headed by Lai Alabi had granted waivers to the tune of several billions to some companies alleged to be associated with Saraki. These debtors were close to the then interim management put in place by the CBN Governor. The explanation then was that in order to recover fully the principal of their non-performing loans, the management of some of the troubled banks started negotiations with key debtors who applied for forbearance.

In the madness of the time, Intercontinental Bank granted waivers to a debtor who owed the bank N11 billion and applied for 70 per cent waiver. Also, another customer who owed the bank N1.5 billion applied for forbearance and got about N500 million waiver. The debtor was billed to pay N1billion but what was said to have reached the bank’s vault was N800 million. The balance of N700 million was given as waiver to the debtor.

In another instance, a customer who owed N7.5 billion was said to have had his entire indebtedness written off.
The suspended CBN Governor, Mallam Lamido Sanusi, when questioned by reporters at the 2009 IMF/World Bank meeting in Istanbul, Turkey, said that the Central Bank will not get involved in the day-to-day running of the troubled banks. He said that the onus of running the banks was in the hands of the managements and the boards.

It was clear from the beginning that what was happening in the industry at the time was not normal as bankers were worried that though it is normal for a long-standing non-performing loan considered lost written off the books of a bank to be so treated, most of the banks bailed out by CBN had no functional boards to grant such waivers, leaving the decision to the Managing Directors, some of whom were acting as sole administrators.

The discretion applied by those chief executives was not in the interest of reviving the ailing banks but to pander to the interest of those who appointed them. In normal circumstances, it is only the accumulated interest and penalty that are built into a loan term that can be granted as waivers, not the principal.

It was abnormal that at a time when the Economic & Financial Crimes Commission, EFCC, was busy recovering debts from chronic debtors, the management of the troubled banks started to give waivers without the approval of any legally constituted board by shareholders. In the ordinary course of doing business, money fully provided for as loan loss when recovered goes to beef-up the capital or shareholders’ funds which the non-performing loan has grossly eroded. What one found disturbing at the time was the fact that the caretaker management of Intercontinental Bank had disclosed that the bank recovered over N78 billion out of the N142.644 billion provisions for loans and other known losses, stating that the waivers the bank granted to debtors was in line with the existing policy in the bank to encourage debtors to pay. Explaining the situation, Lai Alabi had said: “When loans have become bad as they are, when the underlying securities have virtually been totally eroded as we have now, then there is a need to give some concessions in order to encourage such debtors to pay, that is exactly what we did and this is the practice in all banks – both in Nigeria and worldwide. ”There existed such policy on waivers before the present management assumed office, this was then presented to the credit committee which refined it and presented it to the board which approved it. But we are contesting with serious issue of moles in the bank, what these people intended to achieve was to malign the bank, frustrate the progress we have made for the purpose of serving certain interest.

”Most of the figures given out are distorted. For instance, in some cases the amounts they are asked to pay exclude the values of share the loans were used to purchase. Also in most cases, the waivers took into consideration, wrong debits, penalty charges and other entries in dispute; we need to have in mind that our effort has so far yielded a reward of about N80 billion since the intervention.”

Now that it is in the public domain that some of the actions were premeditated to help a friend get what he had craved for but could not get in the ordinary run of business, what redress is possible for those lost five banks?

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