This is my first public reaction to the recent high profile dismissal of 5 Nigerian bank chiefs together with their entire cabinet. My first reaction will not be too analytical as I basically want to lean towards fundamentals this time because that is exactly what matters now. With respect to how the decision will affect investment in banking stocks, that is a bit complex as I will wait for investors and analysts react to what is happening before taking a position for the medium to long term. The decision and action of the CBN under the 'fearful' leadership of Sanusi Lamido Sanusi is a very sensitive one. Very sensitive that it is going to be unfair to refer to his actions as being politically motivated. The sensitivity of this issue emanates from two things: Its timing, and secondly, the persons invloved.
First is the timing. Critics say that 8 weeks is too short a time to take such a very major decision to wipe out the board of directors of 5 banks out of which 4 are mega-banks (in my own view) but let me remind them that Sanusi was a previous colleague to these guys even while he was with UBA and later when he headed First Bank. He has been in the system so he knows where and what are the problems. Dont forget also that we are only 5 months to the deadline for the common year-end policy which I think is probably another nightmare for bankers. But for bankers who had hopes pinned on the fact that the common year-end thing was going to be dumped or postponed, they can begin to have rethink now.
Next key issue for me is the persons involved. Question: If your colleague at work suddenly gets promoted to become your boss and the next day after becoming your boss he sacks you for mishandling the job. Could he have sacked you for mishandling the job while he was your boss or for mishandling the job during the tenure of his predecessor who did nothing to check your excesses? I guess the CBN decision speaks less of the man at the center of it all (Sanusi Lamido) but rather, speaks more of the man who had occupied that office of CBN governor for the past 5 years- Prof Charles Soludo. I remember vividly well Soludo's public defense of Intercontinental bank months ago when news was going around the blogosphere about the bank's illiquidity. Today, Intercontinental is among the banks 'skating on thin ice'. Probably the most high profile sack is that of Erastus Akingbola of Intercontinental bank. This is Nigeria's no1 professional banker in his position as the president of the Chartered Institute of Bankers of Nigeria (CIBN). His dismissal does not carry consequences only for the bank, it does for the Institute and the banking profession in Nigeria as well. At least the, Institute has its guidelines for the professional conduct of members which members are obliged to observe in their career as professional bankers and as long as they continue to be associated with the Institute.
For someone like me, the CBN decision dis not come as a surprise and if you revert to my earlier post titled 'Of CBN test and Nigerian Banks' on 25th June 2009, you will discover the reason why I said this is not a surprise. Barely 12 hours to when the CBN announced the sack of these CEOs, in a discussion with a friend, I said "...what will make up for the long-term sustainability in the Nigerian banking industry are the drivers of business in that sector. Nigerian banks need to change their business model and stop this CABAL banking...". Someone asked 'When issues get to this point, what exactly is fundamentally wrong?' Here's my answer: What is fundamentally wrong is that the fundamentals are wrong. Banks or should I say bankers have literally gone to bed. Over the years, even during the pre-consolidation days, there has been a constant deviation between banks and their traditional and primary role as money creators.
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