The Sun News On-line | Business news
Many Nigerian banks are distressed, expert insists
By KELECHI MGBOJI
Thursday, January 1, 2009
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Dr. Martin Oluba, a seasoned financial analyst has faulted claims by the Central Bank of Nigeria (CBN) that Nigerian banks are financially sound and healthy, insisting that a whole lot of them including those regarded as big are already distressed noting that the signs were already clear that they are distressed.
To buttress his arguement, he said that a study conducted few weeks ago by a foreign institution to which he was invited as partner stumbled on shocking revelations that made them conclude that many banks might have more problems than they currently show.
He said "They presented some of these studies to bank chief executive Officers. But they did not present some of the more shocking details to some of them. But if they are people who can put two and three together, they would know some of the banks that are going down. Even some of the so called big banks did not even make it in line with the popular awards that they got from some organisations".
According to the professor of economics, when a central bank expands its discount window from 24 hours to 365 days, admitting other securities that had not hitherto been admitted, it is a sign of distress. He stressed that what that means was giving opportunity for banks to access ample liquidity to survive.
He noted that CBN's policy reversal in releasing N1.3 trillion through manipulations of Cash Reserve Requirement (CRR) and Liquidity Ratio was all intended to help manage the financial crisis facing the nation's finance houses.
"Ignore CBN's denials. Banks are in crisis; a whole lot of them are in crisis. I heard that there is a bank, a frontline bank for that matter which has been cutting down its staff salary. Why? They are adjusting. Adjustment has become very necessary in managing the situation"|, said the expert.
Oluba who presides over Value Fronteira Limited, a cerebral policy analysis and consultancy outfit based in Lagos, traced the genesis of banks' financial crisis back to three major factors including current meltdown in the capital market, massive withdrawal of funds by foreign investors, and the unprecedented fall of oil prices in the international market.
In his words "A lot of them lost money in the capital market, the foreign institutions that they used to carry out their acquisitions during consolidation have left with their funds; the paper engineering that they used to acquire stakes in banks during consolidation, the money is not there; their direct engagement in oil importation when the price was $147, they didn't know it was going to crash to what it is today. How can they deny the obvious?"
He stated that all investment windows for banks having collapsed, it was hard for them to deny they were passing through financial distress citing a publication which reported that a certain foreign investor withdrew $3 billion in the month of October alone.
It would be recalled that recently Nigeria Deposit Insurance Corporation (NDIC) gave a clean bill of health to only four banks, rated 16 banks as satisfactory, and dismissed four others as unsatisfactory while it said that one bank had a problem.
But Dr. Oluba took the verdict of the NDIC with a pinch of salt insisting that "In an environment where companies engineer accounts, I will discount those conclusions because I know that most banks, the accounts they give to Securities and Exchange Commission (SEC) is different from the one they give to Nigerian Stock Exchange (NSE
), NDIC, CBN, and FIRS depending on what they want to achieve.
"For this reason I will doubt the conclusion of NDIC and discount it by 30 percent. And if you do that, you end up having more unsatisfactory banks. Of course, when a government institution tells you that the establishment it supervises is unsatisfactory in its state of health, then you know that the problem is much more than that, and a lot of lobbying would have taken place".