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Nigeria central bank Governor fires five bank bosses over debt crisis

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Sanusi Lamido - Nigeria central bank Governor
Sanusi Lamido - Nigeria central bank Governor

Nigeria’s central bank Governor Lamido Sanusi fired the chief executive officers of five banks over a mounting debt crisis in the industry and said he would inject 400 billion naira ($2.6 billion) into the companies.

The financial system remains “safe and sound,” Sanusi told the press today in the commercial capital, Lagos, after announcing the dismissals, adding that he had obtained the approval of President Umaru Yar’Adua for the firings.

Eurasia Group, a New York-based research company, said in May that banks in Nigeria, Africa’s second-biggest oil producer, may have as much as $10 billion of toxic assets. The bad debt is partly the result of at least 1 trillion naira of margin loans used to buy shares as equities soared almost 13-fold since 2000, according to Bank of America Corp. Nigeria’s All Share Index tumbled 43 percent in the nine months through June.

“I am satisfied that these five institutions are in a grave situation and their management have acted in a manner detrimental to the interest of their depositors and creditors,” Sanusi said.

The dismissals come two days after U.S. Secretary of State Hillary Clinton visited Nigeria, saying the fifth largest supplier of oil to the U.S. “faces a range of tough challenges.”

Bad Debts

Those dismissed are Erastus Akingbola of Intercontinental Bank Plc, Cecilia Ibru of Oceanic Bank Plc, Bart Ebong of Union Bank Plc, Okey Nwosu of FinBank Plc and Sebastian Adigwe of Afribank Plc, Sanusi said.

Four of the five banks were permanently locked in as borrowers from the central bank, Sanusi said. The fifth was a frequent borrower, he added, without giving names.

The banks had pushed up interest rates on the interbank market and were the principle reason why the central bank guaranteed loans between lenders on July 7, Sanusi said.

“Without that guarantee, most of our banks would not have been able to borrow in the interbank market and would probably have collapsed,” he said.

The bad debts in Nigeria’s banking system compare with deposits of 5.06 trillion naira in July, down from 5.16 trillion in May, according to the Web site of the central bank.

Sanusi made the following appointments: John Aboh becomes CEO of Oceanic, Mahmud Alabi will take the helm at Intercontinental, Nebolisah Arah will head Afribank, Suzanne Iroche is the new chief executive officer of Finbank and Funke Osibodu takes over at Union Bank.

No Surprise

“Frankly, I’m not surprised,” said Rose Umoren, head of the Abuja-based research company, Global Money Ltd. “I don’t think it’s limited to just five banks. If the governor wants to have credibility, he needs to look at the assets of every Nigerian bank.”

The 400 billion naira would be injected into the five banks “with immediate effect,” Sanusi said. The money will be repaid from the “proceeds of capitalization in the near future,” he added, without giving details.

The cash injection was enough to stabilize the businesses and enable them to continue their normal business, he said.

The measure will help to ensure “systemic stability,” Bismarck Rewane, chief executive officer of Lagos-based Financial Derivatives Co. Ltd., a fund manager, said in a phone interview.

Last month, First Bank of Nigeria Plc, the West African nation’s largest lender, said annual profit slumped by two- thirds as the global economic crisis reduced the value of its investments.

Global Crisis

Banks and insurers worldwide have been forced to raise $1.3 trillion of capital after reporting $1.6 trillion of credit- related losses and asset writedowns since the beginning of the financial crisis.

Sanusi, 47, who became the governor of the Central Bank of Nigeria on June 3, promised during his confirmation hearing at the Nigerian Senate to ensure “closer supervision” of the lenders to prevent their collapse.

The central bank can “suspend, fire and assume direct control” of any bank provided it has evidence, Umoren said.

Sanusi replaced Chukwuma Soludo whose changes helped to reduce the number of banks to 24 last year from 89 in 2004. Soludo had said in May that Nigeria could not afford to bail out its banks.

“If our banks were to falter, as a country we can’t even afford a bailout,” he said. “That’s part of the unfairness of the global system.”

Source: Bloomberg

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  1. The decision taken by CBN president is a good one, what i lke to known is the affected banks, what will be the stand of will customers.

  2. Emezina chris zubby

    I want to thank the CBN Governor for a job welldone and also given others the chance to be at the helm of affairs,at least a space has been created for the unemployed graduates,youths like us in the banking sector.please anybody who cares to listen to our cries should please contact me wit d address:zwdoyy2009@yahoo.com

  3. I keep getting these e-mails and I am poor. I do not need my financial situation to become any worse by scammers. This is what is being sent to my personal e-mail, and I was wondering what can be done about it?

    CENTRAL BANK OF NIGERIA
    TINUBU SQUARE,VICTORIA ISLAND,
    LAGOS-NIGERIA
    [OFFICE OF THE GOVERNOR]

    Tel: +2347087596526

    FOREIGN REMITTANCE DEPARTMENT
    CENTRAL BANK OF NIGERIA
    CONTRACT #: MAV/NNPC/FGN/MIN/009,
    Our Ref: CBN/IRD/CBX/021/0

    IMMEDIATE CONTRACT PAYMENT/ CONTRACT #: MAV/NNPC/FGN/MIN/009

    Attn: CONTRACTOR,

    On behalf of the entire members and staffs of the Central Bank of Nigeria
    (CBN), I sincerely apologies for the delay of your payment and all the
    inconveniences that the past government might have indulge you through.
    However, this resulted from some minor problems with our payment system,
    which is inexplicable, and this have held us stranded and indolent, not
    having the aspiration to devote our 100% assiduity in accrediting foreign
    contract payments. I apologies once again.

    As a result of the discovery during the last financial records/audits
    conducted after the last quarter in the year 2008 by Central Bank of
    Nigeria (CBN) in collaboration with the Federal Ministry of Finance (FMF)
    and the Accountant General of the Federation, on outstanding contract
    payments of which the government is incuring deficit, I am mandated to
    make this acknowledgement officially to you by the powers imposed on me as
    the Executive Governor of Central Bank Of Nigeria and therefore declare
    the following discoveries in your file:

    1) Your name has been listed as next on the payment list for the year 2009
    and as such, the contract proceeds information contained in your file is
    hereby underlisted:

    CONTRACT #: MAV/NNPC/FGN/MIN/009,
    FILE #: 0137
    Swift Code: CBN KPL PK,
    A/C#: CBN329606124498
    AMOUNT: US$14.7 MILLION DOLLARS

    2) The contract was executed at the federal government without full
    payment at the initial time by a foreign contractor who executed the
    contract. In the contract Memorandum of Understanding (MOU), it was
    revealed, at the source, that your name is penciled to receive the balance
    if the contractor is no more existing with such factor like death or
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    It is therefore plausible enough to make these assertions to you having
    adjudged the readiness of the federal government to redeem all outstanding
    payment at this point in time when the debts owed are causing deficits in
    the economy as a result of debt servicing.

    Payment Mode

    Your payment will be effected, processed and paid in full by Central Bank
    of Nigeria (CBN) as soon as you respond to this notifiaction.

    FOR RE-CONFIRMATION AND PAYMENT PURPOSE, FORWARD AS FOLLOWS:

    1) YOUR FULL NAMES :
    2) YOUR ADDRESS :
    3) COMPANY NAME (IF ANY) :
    4) AGE, SEX, COUNTRY:
    5) TELEPHONE AND FAX # :
    6) COPY OF YOUR WORKING ID / DRIVERS’ LICENSE :

    In swift response to this notification within few days from now, Central
    Bank will move into action towards payment processing arrangement for this
    payment.

    I strongly recommend that, you should promptly start your clearance as
    soon as possible. kindly reply for more clearification and for immediate
    transfer of your funds.

    YOURS SINCERELY,

    MALLA LAMIDO SANUSI,

    GOVERNOR, CENTRAL BANK OF NIGERIA (CBN).

  4. I get emails like the above every week for the past year and i response to
    to delete my email that is GARBAGE but they just keep on sending them
    its a nightmare please send me a peson to contact that can help me so I can send them the email that iget so he can HELP get rid of this
    NIGHTMARE i am a CHRISTIAN AND IT WOULD BE A BLESSING.

  5. I hope that not same as before Prof.Charles Soludo